Cement makers face storage glut amid dealers’ drag

LAHORE: Cement manufactures’ warehouses are almost saturated owing to a stock glut as traders are holding off their buying to get some clarity on new tax measures introduced in the current year budget, industry officials said.

They said production faces a likely slump down the line and storage capacity crunch may force a few manufacturers to shut down some facilities. “Buying slowed down as cement dealers are reluctant to purchase the commodity… they await clarity on new tax measures in Finance Act 2019, which may weigh on production,” an industry official said.

“The lifting or buying of cement by dealers has reduced by 5 times to around 30,000 tons a day from 150,000 tons a day.”

The official said only institutions are lifting cement from the factories for the mega projects while not a single consignment was dispatched to the dealers who are almost missing from the market.

The industry officials said despite very slow buying factories were continuing to produce cement normally. “Further, the ex-factory price of cement has also increased by almost Rs 35/bag after new taxation measures adopted by the government through Finance Act 2019, reaching Rs605 to Rs640/bag from Rs570 to Rs605/bag,” the official said.

Consequently, the consumer price of cement has also been increased with similar ratio, but due to the shortage of cement in retail market, prices are quoted at Rs670 to Rs700/bag. Officials said the construction activities are also bearing the brunt of this situation as the cement is not available in the markets.

The industry officials said despite a slowdown in the lifting of cement the industry was producing the commodity with the same capacity and was stocking it in its warehouses. “However, now the stores are reaching their storage capacities and it will be jam-packed in next two days, if the buying of cement doesn’t come back to normal,” another official said. “Hence, the cement factories would be compelled to stop production.”

The official said since the cement has a limited shelf life and it cannot be stored for longer periods as it starts freezing, factories will not be able to produce it more than a certain capacity.

Besides, the controlled environment storage capacities of the factories are also limited to hold a certain quantity of the production, the official observed. Analyst said the situation of the cement industry is critical now on production account and it has been entering into a difficult situation of forcibly closing down the factories as the dealers are not lifting the cement from factories.

Further, impact of taxes is also whitened in the prices while further increase in the prices of cement is also around the corner as the government reducing axle load capacity of the cargo carriers which will add in the transportation costs and prices of the cement, they added.