Cement sellers irked by ‘artificial’ supply shortage’

APCMA denies claim, says increased cost of production the reason for higher price.

KARACHI:

Cement retailers have complained that companies in Karachi are creating an artificial supply shortage that will result in a significant increase in prices in the coming weeks.

Contrary to these reports, cement companies deny any shortage in the country as there has been no significant change in supplies or sales, especially in Karachi.

However, a retailer said that the companies are restricting their sales for a week. “Cement companies, especially renowned brands, in Karachi are restricting their sales to retailers since last week,” a cement retailer told The Express Tribune, “This has led to shortages, which can increase the cement prices in the coming weeks.”

All Pakistan Cement Manufacturers Association (APCMA) Chairman Muhammad Ali Tabba, commenting on the reports, said there is no cement shortage anywhere in the country especially in Karachi where a large number of cement producers are functioning.

APCMA is a group of over one-and-a-half dozen cement producers that have often been accused of working as a cartel in the country.

Cement producers say that, an increase in cement prices is inevitable as they have to pass the burden of increased electricity rates onto their consumers. “Cement companies will have to pass on the price increase they have witnessed with the high rates of power and transportation,” added Tabba.

Company officials say cement prices will hover between Rs510-Rs520 per 50-kg bag depending on the cement brands.

When the government raised power rates for the industrial sectors in August, cement producers’ retaliated by stating they will gradually increase cement prices in coordination with high cement demand or sales.

Cement prices are on the rise but this time the trend of price increase is different. Average cement prices in the domestic market is surging constantly but, unlike preceding years, the magnitude of the price increase is not noticeably high.

For instance, cement prices on September 21, 2013 were Rs501 per 50-kg bag, Rs502 on October 24, Rs507 on November 7 and Rs512 on November 28, according to the data compiled by Pakistan Bureau of Statistics (PBS).

Summit Capital analyst Sarfraz Abbasi said, “Cement companies are increasing prices in the range of Rs2 to Rs5 per 50-kg bag a month unlike previous increases of Rs10-Rs15 at a given time.”

According to Abbasi, the average cement prices have been around Rs503 per bag in the first five months of the fiscal year 2014 against per bag price of Rs452 in the corresponding time period of the previous fiscal year showing an increase of 11% year on year.

“The unprecedented hike in the electricity tariff, rising fuel costs and freight rates have impacted the profitability of the cement companies and, thus cement prices will keep surging till the cement price per bag reaches to Rs520-Rs530 per bag,” said Abbasi.

Published in The Express Tribune, December 15^th, 2013.

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