Cement-maker cuts price by Rs50 per bag

[Naveed Yaseen]

By Salman Siddiqui
KARACHI: One of two giant cement manufacturers in the country has reduced cement price by Rs50 to Rs300 per 50kg bag in Sindh province. However, other cement manufacturers have kept prices unchanged across the country.

Cement dealer Walibhai Patel confirmed to The News on Friday Lucky Cement had revised the price downward by Rs50, while other cement producers kept prices around Rs350 per bag.

Cement manufacturers had raised the commodity’s price by about Rs100 per bag in the first quarter of calendar year 2008. They attributed the price increase to skyrocketing price of coal in the world market, which is a major component in cement production. International coal price, however, has plummeted by 68 per cent from its high of $193 per ton in July 2008, said M Rehan Khan of First Capital Equities Ltd (FCEL) Research.

Lucky Cement Chief Executive Officer Muhammad Ali Tabba, talking to The News, said his company had reduced cement price in Karachi and the province of Sindh only to establish a strong market for the company.

He pointed out that the new third production line of the company in Nooriabad had started operating from March and to sell that the company needed to create a market. “So price reduction is a strategy to attract buyers and nothing else.” He said, “the company may revise its price upward in future once it grabs the market in the province. Total production of the commodity from the two already functioning lines was being exported,” he said in reply to a question.

Combined production from all three lines stands at 7.75 million tons per annum, including 1.25 million tons of cement from the third one, he elaborated.

However, an official of Galadari Cement, Badaruddin Fakhri, criticised the reduction in the cement price in the province, declaring it ‘unjustified’. He said the price reduction seemed unprofessional as the practice would create a bad market for others.

He did not agree that there was room for a cut in cement prices in the country owing to a massive fall in coal prices in the world market. He pointed out that slowdown in world and local economies and a cut in local development budget had together caused a decline in the demand of cement in the country. It meant lowering of production and low production usually cost higher, which was a simple demand and supply rule in any economy, he argued.

Local cement sector has already started bearing the brunt of economic slowdown with domestic demand falling 17 per cent in the first nine months (July to March) of fiscal year 2008-09.

“We expect local cement demand to remain depressed as consumption will continue to face strong headwinds due to lukewarm construction activities in the wake of economic slowdown, high interest rates, liquidity crunch and cut in infrastructure spending both in public and private sectors,” said Khan of FCEL Research.

http://www.thenews.com.pk/daily_detail.asp?id=172981