Prices will maintain this level until February next year followed by a gradual rise on the back of higher demand for reconstruction activities, analysts said.
If the current prices persist for the next two months, followed by a gradual rise, prices may be around Rs305 per bag, said JS Global Capital analyst Atif Zafar. This could result in a negative impact of Rs1.2 per share and Rs1.3 per share on DG Khan Cement (DGKC) and Lucky Cement, respectively, said Zafar.
However, prices in the southern part of the country continue to hover in the range of Rs320 to Rs325 per bag.
Cement sales have fallen by 12 per cent to 12.2 million tons in the first five months of fiscal year 2011 owing to slowdown in demand amid recent floods.
The winter phenomenon
Some smaller players have cut their prices to try and sell stock at a discount before the end of the quarter, said IGI Securities analyst Sana Abdullah.
Hence, both Lucky Cement and DG Khan Cement also reduced their prices by Rs5-10 per bag during the week, added Abdullah.
Coal prices surge
Floods in Australia, the world’s biggest exporter of coal, have caused disruption in production from the mines in Queensland. This has resulted in an upward pressure on international coal prices, which have shot up more than eight per cent to $118 per ton, the highest since October 2008.
Zafar estimates that every $5 a ton rise in average coal prices — an essential raw material for cement-making — will result in earnings decline for DG Khan Cement and Lucky Cement by Rs0.5 per share and Rs0.86 per share, respectively.
Retail prices for Lucky Cement are currently hovering at Rs325 per bag while DG Khan Cement is selling its product at Rs300 per bag.
Published in The Express Tribune, December 25th, 2010.
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