LAHORE - The cement dispatches have reduced to just 60,000 tons from about 80,000 tons on daily basis following the unscheduled and prolonged power breakdowns all across the Punjab, slowing the construction activities in the province, industry sources said. The sharp fall in demand and resultant over-supply has resulted in price decline of up to Rs20 per bag for different brands in the area.

Industry sources said that the current decline is fueled by excessive loadshedding which has hampered construction activities in North Zone particularly, which is the major market for cement consumption and has been witnessing massive power cuts.

They said that cement production capacity in Pakistan is 44 million tons annually while local demand is only 24 million tons, leaving a surplus of 20 million tons. Cement industry is striving for survival and making efforts for exports of its surplus capacity. Unfortunately, cement exports are continuously declining and reason for decline in exports is mainly high incidence of transportation cost which makes export unfeasible.

During May 2012, cement prices came down in the northern part of the country and receded from Rs435-440 to Rs415-420 due to commencement of wheat harvesting, unscheduled loadshedding, rains, shortage of labour, and reduction in spending on PSDP.

Cement sector, being a process industry is always required to maintain adequate stock levels for smooth operations. Coal prices have dropped to $95 per ton, but during the current financial year, average cost to the industry has been around $ 108 per ton, the same cost, which was charged in last financial year.

The cement industry claimed that it did not yet get any benefit from reduction in coal prices mainly due to rupee devaluation, which is expected to further offset reduction in FOB price. Cement sector claimed that industry has been absorbing the impact of recent increases in input prices of electricity, gypsum, devaluation of Pak rupee and transportation of goods from Karachi by any unit in the North zone due to severely depressed demand.

They said that energy, which constitutes more than 60 per cent cost of production, has taken a quantum jump in a couple of years, making the production cost almost double. Government of Pakistan through its power distribution companies is charging fuel price adjustment and during the last month it charged Rs2 per kwh. The impact of fuel price adjustment is Rs10 per bag, they added.

They said that after the opening of Wagha border, mine owners are exporting gypsum in bulk quantity resulting in depleting scare resources of the country without any value addition resulting in increased cost of gypsum for local consumers. If exports of gypsum increase, cost to local cement units shall also increase further, impacting cement prices. They questioned the prudence of allowing gypsum exports to the neighouring country, which has created NTBs in the way of cement export from Pakistan.