Cement companies of Pakistan may opt for coal import from Afghanistan owing to a spike in the price of the input imported through the sea route from other countries.
“Afghan coal is cheaper compared to the coal imported through sea links from other countries including South Africa,” said Taurus Securities analyst Mustajab Ali Kazmi in a report on Tuesday.
“Although the quality of Afghan coal is a bit inferior than the one imported from other countries, the companies resort to buying cheaper coal to increase margins.”
Some cement industry stakeholders, however, were of the view that the neighbouring country’s coal could not cater to Pakistan’s needs.
In comments to The Express Tribune, All Pakistan Cement Manufacturers Association (APCMA) Secretary General Shahzad Ahmed said Afghanistan’s coal could not meet the needs of Pakistan.
He urged the government to develop the facilities for coal import through the sea route such as improving the capacity of ports.
The cement sector registered a 20% year-on-year expansion in fiscal year 2020-21 as total sales of the commodity came in at 57.4 million tons.
“Cement sector witnessed the highest-ever growth in the previous fiscal year on the back of strong recovery in demand,” said Kazmi in the report. He added that the construction package, extended by the government, coupled with the announcement of large-scale infrastructure projects including dams and highways gave a boost to the cement industry.
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In addition, a 27% surge in remittances in FY21 also lent support to the sector by driving demand for housing units. During FY21, exports of the commodity increased 19% to 9.3 million tons due to the reopening of international borders, mainly of Afghanistan, as lockdown restrictions were eased because of the commencement of mass vaccination drives around the globe, the report said.
During the year, average retail prices of cement in the northern region stood at around Rs640 per bag while in the south it was available at around Rs670, according to the report. “Price of cement in the north jumped significantly during the year, which was attributable to the increase in demand arising from the construction of dams, highways and hydroelectric power projects,” it said.
According to the Water and Power Development Authority (Wapda), work on 21 dams and hydel power projects is underway to deal with the nationwide power and water shortages.
Of these, work on three hydroelectric power projects - Kurram Tangi, Mohmand Dam and Tarbela Extension V - is in progress while eight other projects are ready for construction including the much-anticipated Diamer-Bhasha and Dasu dams. Moreover, feasibility reports for 12 additional projects are being prepared.
“Current average capacity utilisation by cement players in the north hovers around 85%,” said the analyst. “We expect demand to remain upbeat in the north and capacity utilisation to maximise.” He pointed out that an uptrend in international coal prices could impact industry margins in the near future. Coal prices tend to impact fuel and power costs, which are a major part of cement production. Coal prices have risen from $70 per ton at the beginning of fiscal year 2020-21 to $137 per ton at present.
Published in The Express Tribune, July 21st, 2021.
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