KARACHI - The recent decline in local cement prices has left the cement industry of Pakistan in deep trouble as a number of cement manufacturing companies are facing huge losses for this decline, The Nation has learnt. Moreover, it is expected that cement prices will further decrease to Rs30/bag as the demand from the local industry is very low and has not shown any sign of improvement. The main reason for this decline in the prices is said to be the extreme low demand of cement in local industry. However, due to the low demand, the export of local cement has gone high up to a huge level. With low demand and excess supply, prices always come down while competition starts among the manufacturers, said Usman Masood Khan, Director Pioneer Cement while talking to The Nation. He further said that most of the cement companies have survived this critical time by exporting the cement. Realistically, the local cement industry is facing a massive turmoil and without the export option, cement industry cannot survive. The local real estate industry is also facing tough time and it has played a major role in low demand of cement. Construction business has witnessed almost 50 per cent decline and this has caused trouble to cement industry as well. With the expectation of further decrease in the prices, I am afraid that cement industry will further go down, he added. Meanwhile, the decline in cement prices finally came around as prices were cut to Rs260/bag. Though average retail prices in the country have so far declined gradually during CY09 by 9 per cent YTD, the dramatic cut this time came on the back of reduced domestic demand during the monsoon season plus expectation of reduced activity during the coming month of Ramadan. Though the discussion with the key industry players suggests that recent decline may be of temporary nature, we believe that reversion of prices to previous levels seems improbable, given a demand slowdown scenario in the coming winter season, coupled with pressures from the authorities to ease prices off due to much reduced manufacturing costs (i.e. coal). Moreover, we were already of the view that previously higher levels were anyhow a bit unsustainable as significant decline in fuel costs of the manufacturers during 2HFY09 resulted in boosting profitability of the industry during FY09, stated Farhan Bashir Khan at InvestCap Research. Still, there remains again a distant possibility of partial price reversion in case things settle down between the manufacturers ahead of any likely price war. In addition, prices are not always immediately passed on at retail level given the consideration of inventory loss aversion at the distributor level, he detailed.