Displaying items by tag: Pakistan

Pakistan: Cement manufacturers in Pakistan are regretting their decision to increase capacity as consumption has remained stagnant over the past four years, according to the All Pakistan Cement Manufacturers Association (APCMA). Exports are also declining, forcing the sector to operate at 69% of its installed capacity.

An APCMA spokesman explained how capacities were increased when the economy was booming and that most of the plant capacities were increased in the northern part of the country. For these regions Afghanistan was the only export market but its potential was limited. Exports to India were limited at that time and today as well due to many non-tariff barriers erected by India.

The spokesman regretted that the growth during the past four years had been much below expectations and that the government also failed to provide funds for, what he called, 'essential' infrastructure. The fierce competition between the mills sitting on huge capacities kept the rates of the commodity much below the average inflation in the country, he added. Rates of inputs of the industry increased in line with the inflation and rupee devaluation while the cement prices increased by just 6% from the average cement rates in 2006.

The APCMA spokesman added that exports, which provided some relief to the industry in the past few years, have declined at a rapid pace during the first eight months of the current fiscal year (July 2011 to February 2012). During this period the decline in exports was 5.57% to 5.62Mt from 5.95Mt during the corresponding period in 2010-2011. He said that exports to India, mostly via train, had increased by 39.5%.

Pakistan: Many Pakistani cement manufacturers have posted robust earnings during the first half of the 2012 financial year, which ended on 31 December 2011. Across the six major producers, representing 68% of the market, the overall profitability of the sector grew by a factor of 2.2 over the same period of 2010. Overall net sales of the sector grew by 32% to US$418m.

Separately most Pakistani cement producers posted profits for the six month period. DG Khan and Lucky Cement, which between them contribute around 25-28% of total cement sales, posted robust earnings per share growth. On the other hand, Fauji and Thatta Cement, despite better overall margins, posted losses. Fauji Cement posted losses due to lower utilisation of its new 2.1Mt/yr plant due to power outages and lower demand, while Thatta cement remained in the red due to extremely low sales, which were approximately 20% of those expected.

Pakistan: The State Bank of Pakistan (SBP) has stated that "cement prices remain inexplicably high," in its State of Pakistan's Economy report published on 28 January 2012.

Expressing concerns over an increase of 17.3% in cement prices from July – November 2011 compared to the same period in the previous financial year, SBP has highlighted that this increase arose despite "a reduction on cement taxes and only a 10.7% increase in coal prices during the period."

The high prices of building materials and the strain of sales tax are expected to dent the growth of the manufacturing sector during the current financial year.

The large scale manufacturing (LSM) sector has registered growth of 2.1% in the first quarter, compared to a 2.9% decline over the same period last year. Lower duties on cement, beverages, automobiles and air conditioners have provided fiscal support to this sector according to SBP.

Yet SBP has warned that growth in the LSM sector may not be sustainable in coming months as the low base effect brought on by floods in 2011 withers away in subsequent periods.

Afghanistan/Pakistan: Exporters from Pakistan have raised cement prices in the Afghan market by 25%.

Cement exports to Afghanistan currently represent 50% of the total exports from Pakistan where major quantities are shipped by the companies close to the north-west border between the neighbouring countries. According to Shagufta Irshad, a senior analyst of KASB Securities, Pakistan exported 4.7Mt to Afghanistan during the year 2010-2011 and 2.5Mt during the first half of 2011-2012. This increase will have a positive impact on the earnings of exporting companies in the current financial year, as well as to the country as a whole.

Currently Pakistani cement dominates in the central and north regions of Afghanistan where major reconstruction activities are underway. The Pakistani companies with the most exposure to the Afghan market include Lucky Cement, Bestway, Cherat, Lafarge Cement, Fauji Cement and DG Khan Cement. DG Khan Cement has a higher exposure to the Afghan market than Lucky Cement because both its plants are located in the northern region.

Pakistan's exports to Afghanistan currently contribute 30% of DG Khan Cement's total exports, compared to 20-25% for Lucky Cement. Shagufta noted that this increase will bring a rise of 16% and 3% in the earnings for DG Khan Cement and Lucky Cement respectively in the year 2011-2012.

Pakistan: The Competition Commission of Pakistan (CCP) has conducted searches and inspections at the premises of the All Pakistan Cement Manufacturers Association (APCMA) and Kohat Cement in Lahore under Section 34 of the Competition Act 2010. It said that it carried out the searches to look for proof of suspected cartelisation in the cement sector.

According to a statement issued by the CCP, it had obtained information from an informant that contained copies of certain e-mails that had been sent by the Secretary of APCMA to cement manufacturers. The contents of the e-mails provided by the informant revealed that the cement manufactures had prima facie collectively devised a vigilance plan by which the cement dispatches at one cement production unit are monitored by a team of another unit and vice versa.

Such monitoring of cement dispatches was previously recognised as an integral part of a collusive arrangement among the cement manufacturers. The CCP has declared such arrangements to be in violation of Section 4 of the Competition Act 2010. It imposed a penalty of nearly US$700m on the APCMA and its members. This matter has been taken to court and is still pending.

The fresh probe by CCP was based on a separate set of facts that suggested that the cement manufacturers have again formed a collusive arrangement and to ensure compliance the monitoring function is being performed by cement manufacturers themselves under the auspices of APCMA. When the CCP search and inspection team arrived at the APCMA premises, it discovered that the APCMA secretary was not present in the office and all the records were locked. After initial hesitation the APCMA allowed the CCP to access the data. A search and inspection was also carried out at of the office of the APCMA President, who is also the Chief Executive of Kohat Cement.

Local media has long speculated that cartelisation was in place in the cement sector based on rapid cement price increases in recent months. Pakistan's cement capacity utilisation also dropped to a 10-year low of 69.7% in the six months to 31 December 2011. "The expected turn around in the economy did not materialise because the capacity of the sector continued to increase," said a spokesman from the APCMA, commenting before the CCP inspections were made. He said that expansions in the cement sector had been planned several years ago when the economy had been in a far better situation.

Pakistan: The capacity utilisation of the cement sector in Pakistan has reached its lowest point in the last decade. Capacity utilisation sank to 70% in the first half of the fiscal year, which ended on 31 December 2011 for the current fiscal year. Meanwhile exports have continued to decline, offsetting the gains in local consumption.

"The expected turn around in the economy did not materialise as the capacities of the sector continued increasing," said a spokesman of the All Pakistan Cement Manufacturers' Association (APCMA). He said that expansions in the cement sector were planned six years ago when the economy was far stronger. The prolonged recession of recent years and drying up of government development programmes had disrupted the viability of the cement sector.

The APCMA spokesman added that domestic demand in December 2011 was encouraging, showing a growth of over 13% compared to December 2010. This compensated to some extent the 5% decline in local demand in November 2011. However exports remained under pressure during the six months to December 2011, posting a decline in four of the last six months. Exports declined by over 8% in December 2011. The overall decline in exports stood at 5% during the July - December 2011 period.

Total cement output in the country for the first two quarters of the fiscal year reached 15.40Mt, which was 4% higher than the 14.78Mt seen during the corresponding period of 2010. The majority of the capacity is located in the northern part of the country, where the industry posted a modest gain of 6% in domestic market and a lower increase of 3% in exports.

The spokesman for APCMA also pointed out that most of its member companies had been incurring huge losses after substantial increases in the cost of production. Input prices, especially coal, furnace oil, diesel, electricity have significantly increased in recent months forcing up the cost of production for cement producers.

Pakistan: Total cement sales in Pakistan have remained flat during the first five months of the 2011/12 fiscal year.

From July to November 2011 sales were 12.42Mt compared to 12.54Mt to the same period in 2010/11. It is expected that exports are likely to decline by 4% to 3.75Mt as demand from Pakistan's major export markets in the Middle East have been slowing down on account of subdued economic activity. Monthly sales figures for November 2011 are expected to show a decline by 12% on a year-on-year basis to 2.12Mt. This has mainly been driven by a 14% decline in exports to 0.59Mt compared to 0.68Mt in the same period in 2010/11.

This national trend was repeated locally in Karachi where sales underwent a tiny improvement to 8.67Mt in the first five months of 2011/12 compared to 8.62Mt in the same period in the pervious year. Local sales declined by 11% to 1.53Mt compared to 1.73Mt in November 2010 due to a slowdown in construction activities in northern Pakistan. Despite low sales it is expected that Karachi will perform well in the Pakistan sector due to improved pricing power after the adoption of 'price discipline strategies'.

Pakistan: Cement sales fell to their lowest level in Pakistan since September 2010 in August 2011 to 2.4Mt, down 18% month-on-month. This is the steepest month-on-month fall in sales since 2009.

The key contributors to the decline were heavy rainfall along with lesser working hours during Ramadan. Domestic demand stood at 1.6Mt, down 19% month-on-month. Exports slipped to 714,000t, down 14% month-on-month, hindered by logistical issues in Afghanistan.

However, the floods in 2010 have helped total sales in the 2011/12 fiscal year (which started on 1 July 2011). According to statistics from the All Pakistan Cement Manufacturers Association, sales by Pakistani firms rose by 7% to 5.23Mt in the first two months of the 2011/12 fiscal year from 4.91Mt in the 2010/11 fiscal year.

Analysts expect this monthly trend to reverse on the back of an improvement in weather conditions. Overall cement sales should reach 32.8Mt in the 2011-12 financial year, up 5% from 2010-11, mainly driven by increased domestic demand.

Pakistan: The sales of Pakistani cement firms surged by 7% to 5.23Mt in the first two months of the 2011/12 fiscal year (which started on 1 July 2011) from 4.91Mt in the 2010/11 fiscal year, according to statistics from the All Pakistan Cement Manufacturers Association (APCMA).

The growth in overall dispatches is attributed to the 14% year-on-year upsurge in local dispatches that have reached 3.68Mt, up from 3.24Mt a year earlier. Cement exports fell by 7% to 1.55Mt from 1.67Mt/yr over the same time frame.

Pakistan: The Capital Development Authority (CDA) for Islamabad has made temporary arrangement with Fauji Cement for the disposal of garbage from Sector I-14 of the city to cut pollution. Disposal of garbage has become a major issue for the city and the agreement was carried out in the interests of citizens a CDA official announced.

Fauji Cement has installed a waste processing plant at its site in the Tehsil Fateh Jang region of the Attock District. Here solid waste is processed for the generation of fuel to run the plant using Refuse Derived Fuel technology. As per the agreement, the CDA transports garbage to a nearby green belt whereupon Fauji Cement takes responsibility for segregating the material, taking it to the plant and covering the remaining material with mud.

The CDA official stated that previously the garbage was being disposed of in deep ditches covered with soil but it was an unhygienic and undesirable practice. However, as the Fauji Cement covers the garbage (remains) with mud, there is hardly any adverse impact on the environment. Currently a study is being conducted to gauge the impact of disposal of garbage on the environment in Islamabad.