Cement manufacturers continue to operate below 70 per cent installed capacity

Karachi: Cement manufacturers in the country continue to operate below 70 percent installed capacity in January 2012 as well as in first six months of this fiscal due to which they could not pass on high production cost to consumers.

All Pakistan Cement Manufacturers Association APCMA spokesman Tuesday said though current cement rates are over Rs 125 lower in Pakistan than neighbouring India, the industry is being unfairly targeted on price issue. During past four years inflation and bank mark up remained in double digits that forced producers of most items except cement to increase rates according to increase in input cost.

He said cement rates rose from Rs 252 per bag in December 2006 to Rs 293 per bag in June 2011 13 percent increase. Compared with nominal increase, urea price increased from Rs 530 per bag in December 2006 to Rs 1407 per bag by June 2011 over 275 percent increase. DAP fertilizer price shot up from Rs 871 per bag on December 2006 to Rs 4031 per bag by June 2011 410 percent increase in last five years. Sugar price rose from Rs 30 per kg in December 2006 to Rs 69 per kg by June 2011 hefty increase of over 110 percent.

He said increases in rates of different items were due to abnormal increase in input costs and affected entire manufacturing sector. However, since cement demand during this entire period remained below production capacity, manufacturers were unable to pass on impact of high production cost to consumers. Most of them are posting losses and two cement units have closed.

He said electricity, coal, gas, diesel are main input cost of cement industry. Electricity rate rose from Rs 1.87 per unit in June 2006 to Rs 10.69 per unit. Even off peak rates increased from Rs 1.11 per unit to Rs 5.97 per unit. Gas available to captive power units at Rs 241per MMBTU in June 2011 rose to Rs 382.37 per MMBTU in June 2011. Light diesel prices jumped from Rs 33 per liter in March 2007 to Rs 88 per liter in June 2011. Coal rates from $51 per ton in December 2006 to $111 per ton in December 2011.

He said cement industry paid heavy price for production capacity expansion planned on assumption that economy would grow at an average of 6 percent or above. Unfortunately, it averaged 2.5 percent in past four years that suppressed cement demand in local market.

Chairman APCMA Aizaz Mansoor Sheikh said industry produced 17.94 million tons cement in first seven months of this fiscal ending January 2012 which is only 3.94 percent higher than corresponding period of last fiscal. Surge of 7.21 percent in domestic demand was offset by 3.59 percent decline in exports.

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