Healthy growth seen in cement export

[Naveed Yaseen]

RIZWAN BHATTI
KARACHI (July 03 2008): Pakistan's cement exports have witnessed a healthy growth of 142 percent to historical level of 7.712 million tonnes during the 2007-08 fiscal year in the wake of rising international demand, industry sources said. They said that at present, regional countries were facing huge shortage of cement, which had played a key role in achieving landmark cement exports during the last fiscal year.

"During the last fiscal year, strong external demands from the Gulf countries have continued pushing local companies to invest more in the cement sector, besides utilising their maximum capacity to meet international demand," they said.

Statistics, available from All Pakistan Cement Manufacturers Association (APCMA), show that cement export registered a robust increase of 4.528 million tonnes during the 2007-08 fiscal year (July-June) and it has touched a new mark of 7,716,620 tonnes as against 3,188,494 tonnes exports in the same period of 2006-07.

Pakistani companies are exporting cement at an average rate of 60-70 dollars per tonne and as per average price overall exports stood at some 500 million dollars in 2008 fiscal year.

Overall cement dispatches have also increased by 24.31 percent to an all time high level of 30,112,142 tonnes during the last fiscal year as compared to 24,222,775 tonnes during the 2006-07 fiscal year, depicting an increase of 5,889,367 tonnes during July-June of 2008 fiscal year. However, the local dispatches showed poor performance, as their growth witnessed a six percent fall during the 2008 fiscal year.

Local dispatches during the last fiscal year stood at 22,395,522 tonnes as compared to 21,034,282 million tonnes, depicting an increase of 6.10 percent during the last fiscal year. To meet international and local demand, the cement companies had used maximum capacity utilisation during the 2007-08 fiscal year 2006-07, which stood at about 80 percent, sources said.

Overall cement dispatches witnessed an increase of 24 percent in June 2008 to 2,771,210 tonnes as compared to 2,225,630 tonnes in June 2007. During the last month, cement export stood at 916,604 tonnes with an increase of 133 percent, while the local dispatches have gone up by 1.16 percent to 1,854,606 tonnes during June 2008.

Cement industry's installed capacity had more than doubled during the last five years, which helped the industry touch an all time high dispatches mark during the last fiscal year, industry sources said. "Low prices trend has helped to capture the regional cement market. However, they deserve a raise in the duty drawback", they added.

They said that the raise in the export had emerged after the government decisions regarding restoration of the duty drawback on cement exports, in which the Federal Board of Revenue (FBR) had allowed duty drawback at the rate of Rs 25.08 per tonne on cement export.

The duty drawback facility is effective since September 27, 2006. However, despite the increases in the dollar rate and other changes it still stood at Rs 25 per bag, which needs to be increased, they said.

They said that slow growth in the dispatches is compromised by increasing cost and high tax burden standing at Rs 90 per bag, some 30 percent of overall cement bag price. "Enhancement of production by local cement factories is the another prominent reason behind this huge increase of 142 percent in cement exports", they added.

However, they pointed out that 85 percent of the listed cement companies have registered huge losses from operations amounting to Rs 14 billion during the first nine months of the current fiscal.

These losses occurred mainly due to rising cost of doing business and an imbalance in supply-demand phenomenon, resulting in depressed market rates, they added. "The government should realise the impact of taxes imposed on the local sale of cement and give some relief to the cement sector", the demanded.

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