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| Cement exports may rise as shortage persists in region |
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Saturday, May 17, 2008
KARACHI: Cement exports from the country are still lucrative due to the commodity’s high demand and shortage in the region, especially in India and the UAE, placing Pakistan in a favourable position to further increase its exports, a report says.
According to latest data, cement sales increased by 24 per cent in 10 months (July-April) of fiscal year 2008. This growth has been primarily due to a 142 per cent jump in exports during the period.
At present, neighboring India and the United Arab Emirates are the key export markets for Pakistani cement because of an unprecedented increase in their construction activities, brokerage house JS Research reported on Friday.
Indian authorities have been desperately trying to reduce local cement prices to ease rising inflation. For this purpose, they have in the past six months imported around 300,000 tons of cement from Pakistan and are planning to double it to 600,000 tons by June. Currently, India is facing a shortage of around 5 to 6 million tons per annum.
In an effort to increase cement imports, the Indian government is working to remove infrastructural and procedural constraints. It is trying to increase railway rakes from Pakistan to four from the current one, which will help boost cement supply through railway by three fold. Moreover, officials are discussing to allow cement trucks to travel to Amritsar instead of unloading at the border to smoothen supplies.
Furthermore, talks are also going on to install a conveyor belt at the border on which cement can be loaded from Pakistan’s side and reach India. These measures will bode well for Pakistan’s cement companies as freight charges through sea have jumped up from $3 per tonne to $9 per tonne.
Cement demand in the UAE is likely to stay higher with an expected 23.5 per cent growth in construction activities this year. Moreover, with cement shortage of around 2.5 to 3.5 million tons in the UAE and export ban in major exporting countries like Egypt and India, Pakistan is poised to reap the benefits of regional shortages. Besides, the shortage of limestone in the Middle East is expected to keep cement production under pressure in the region.
Along with cement, clinker demand is rising in the UAE. As clinker price free on board (fob) from Pakistan is low at $64 to $66 per ton, it is quite cheap for the UAE importers.
Cement prices in India have slightly come down after the government imposed a ban on exports. Prices, which averaged 243 to 247 Indian rupees per bag (Pak Rs374-380 per bag), have now eased by 3 to 7 Indian rupees (Pak Rs5-10) to Rs238 per bag (Pak Rs367 per bag).
Similarly, in order to cut down construction costs, cement producers in the UAE have agreed to reduce the price cap from 17 UAE dirham per bag (Pak Rs302 per bag) to 16 dirham per bag (Pak Rs284). However, the export of cement from Pakistan is still attractive at fob price of $70 per tonne (UAE dirham 12.4 per bag, Rs242 per bag). Adding average freight cost of $5-10 per ton it will take landed price of Pakistani cement to around $75-77 per ton (UAE dirham 14 per bag, Pak Rs260 per bag). So, Pakistan’s cement is still competitive for exports to India and the UAE.
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