CEMENT MAKERS HIT CONSUMERS TWICE
The cement makers from South region have increased the commodity price second time since the budget by Rs 10 per bag and North would follow the suit in jacking their prices up, industry sources confirmed.
Sources told Pakistan Today that was a zonal adjustment as compared to a change in minimal retail prices (MRP) of cement, and the South region would also follow in their price adjustments from the start of November.
The manufacturers would keep making adjustments in prices up to around Rs 38 per bag following the jacking up of international coal prices. They say the international coal price would be passed on gradually. However, they asserted the next phase would be carried with the increase of Rs 15 per bag from November. They said that prices may keep increasing on short term basis as international coal markets continue to find equilibrium price.
Commenting on new hike in cement price, Association of Builders and Developers Pakistan (ABAD), North Chairman Akbar Sheikh said that cement prices were already high in Pakistan as compared to regional prices. He held the government responsible for cement price hike as it was not able to develop any price mechanism for the commodity, which approximately makes up to 40 per cent of the total cost of construction.
This is the second round of increase in cement prices after the introduction of a new formula to calculate FED on cement in present budget for 2016-17, fixed at Rs1 per kg. The previous mechanism of calculation was different on variable 5 per cent FED on Marginal Retail Price (MRP) of a cement bag. The new FED collection method has increased the price of a 50 kg cement bag by Rs 35.
Industry sources also pointed out that coal traded at $92.80 on October 24, which historically, an all time high of $139.05 in January, 2011, which warranted incremental pass-on to offset impact. “To neutralize this, we have already assumed Rs10 per bag pass-on in prices, they say.
They said that several factors have been contributing to overall cost efficiencies, coal was one of the few fuels to have import duty which has not been justified to the cement industry as the predominant consumer of imported coal in Pakistan and consumes almost 95 per cent of the 4.5 million tons annually.
The sector has proactively pursued captive power generation to contribute to their energy needs, installed waste heat recovery (WHR) units that use existing plants heat to generate power while coal prices in the global market have been falling in tandem with oil prices since December 2014 that have together brought down energy costs.