Cement despatches during the July-March period of the current fiscal amounted to 16.017 million tons, a decline of 7.86 percent as compared to despatches of 17.383 million tons achieved during the corresponding period of last year, claims data released by All Pakistan Cement Manufacturers Association (APCMA).
Cement despatch data further revealed that cement units located in the north posted a decline of a hefty 12.06 percent during this period while cement units located in the southern region of the country, posted a gain of 17.41 percent, said a spokesman of the Association here on Monday.
The overall decline in exports was 14.46 percent being 6.724 million tons, against exports of 7.860 million tons during the corresponding period of last year. However, exports to Afghanistan increased by over 16 percent from 2.820 million tons to 3.277 million tons while exports to India declined by 22.39 percent during the first three quarters of this fiscal to 0.382 million tons. Cement exports to other destinations via sea declined by 32.69 percent to 2.905 million tons.
In the month of March 2011, the total cement despatches stood at 2.223 million tons showing a decline of 3.76 percent against despatches of 2.310 million tons in March 2010. Cement exports in March 2011 declined by 11.83 percent to 0.820 million tons as compared with the corresponding month of last year.
Capacity utilisation of the cement sector during first nine months of this fiscal dropped precipitously to 73.53 percent, which is the lowest since 2004-05 when the sector utilised capacity up to 91.32 percent on the back of cement sales decline by almost 10 percent.
Industry experts fear a near total collapse of the sector if immediate remedial steps are not taken. They said that the decline in domestic sales of cement is due to subdued economic activities. However, they said as the global economy shows signs of recovery, the decline of 14.46 percent in cement exports should be a matter of grave concern for the economic managers of the country.
They said that cement exports showed robust growth of 140 percent in 2007-8 and over 39 percent in 2008-09 - the two years when the global recession was at its peak. "There is huge demand for cement in neighbouring India", said one analyst adding that the main reason is high transportation cost from upcountry (where most of the cement plants are located) to seaports. Moreover, he added, failure of the government to convince India to allow Pakistani trucks carrying cement to cross Wagah border has denied the country a lucrative market that could earn the country at least a billion dollars every year. Withdrawal of freight subsidy to off set high transportation costs from upcountry has also contributed to loss of exports.
Spokesman for All Pakistan Cement Manufacturers Association (APCMA) also denied the notion of any collusion for increase in cement prices and pointed out that most of its member companies had been incurring huge losses after substantial surge in the cost of production.
The input prices, especially coal, furnace oil, diesel, paper bags, electricity and rate of interest have witnessed a significant increase from last few months, which have jacked up phenomenally, cement producers' cost of production. The government has recently increased the SED to 2.5 percent from previous one percent through a Presidential Ordinance, which has caused hike in cement prices. Apart from this, the increase in petroleum products and electricity has also contributed to this problem.
During the first half of current fiscal year, 7 cement units suffered loss before taxation aggregating to Rs 2.375 billion while only 3 cement units, of which 2 are located near Karachi in close proximity to the sea port, earned profit of Rs 2.088 billion. At the end of last fiscal, industry debts to financial institution amounted to a staggering over Rs 132 billion, the spokesman concluded.