LAHORE: Drastic increase in international coal and diesel prices is leading to increase in the cost of cement production which may impact cement prices. According to the sources, the cement industry is already facing a continuing increase in the cost of manufacturing due to the escalating price of coal in the international market. The price of coal has increased by the US$35 per ton in the last six months. In July, 2020 C&F Karachi coal prices were around the US$60 per ton which has increased to around the US$95 per ton in December 2020.
The impact of the increase in coal prices from July 2020 to December 2020 works out to Rs740 per ton (Rs37 per bag).
Sources said the increase in coal price is pushing up the cost of production. During the last six months, coal prices increased by around 55 percent as compared to coal price prevailing in July 2020. During the last financial year, the cement sector suffered huge losses. The sector posted a loss of Rs19.761 billion from core cement operations.
Prime Minister of Pakistan Imran Khan has given an incentive package to the construction sector to alleviate the economic slowdown caused by the global pandemic of COVID-19. Banks are also directed to provide cheap loans for construction activities to put the economy on a recovery track. These sincere efforts of restoration of Pakistan's economy are being hit by rising costs due to increase in coal price which is one of the major cost factors for the cement manufacturers, sources in cement industry told Business Recorder here on Tuesday.
The sources mentioned that duty and taxes on cement are very high. Cement is subject to Federal excise duty at Rs1500 per ton (Rs75 per bag) and general sales tax at the rate of 17 percent (Rs77 per bag) of MRP. The total direct taxes on cement are Rs152 per bag. Reduction in these duties and taxes will reduce the cement prices.
It is appropriate to mention that after double-digit growth in cement sales during September and October 2020, lowest monthly growth was recorded in November 2020.
The cement sector posted a growth of 4.19% in its sales during November 2020 compared to the same month of last year. Total cement dispatches during November 2020 were recorded at 4.51 million tons, an increase of 4.19% against 4.33 million tons in November 2019.
Exports registered a reduction of 4.99%, dropping to 766,273 tons against 806,521 tons last year. It is for the first time in the current fiscal year when exports have decreased; otherwise, they had been rising since July 2020.
Copyright Business Recorder, 2020
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