With commencement of the harvest season and other developments including load-shedding, rains and shortage of labour, construction activities in northern part of the country have sharply declined, resulting in huge fall in both sales and prices of cement.
Industry sources claimed this while describing the current situation and said that the immediate impact is evident by the fact that daily dispatches have reduced to a mere 60,000 tons from about 80,000 tons. Sharp fall in demand and resultant over supply has resulted in price decline of Rs 20 to Rs 25 per bag for different brands.
The current trend of decline is also fuelled by excessive load shedding, which hampers construction activities in Punjab particularly, which is the major market for cement consumption and has been witnessing massive load shedding, which has dampened industrial and construction activities.
'The units of the North zone have been facing losses on coal import as they are not given freight subsidies by the government,' sources said, adding that opening of Wahga border is a good option as it will help the units of the North to gain some benefits through exports.
Since the government has not yet paid the outstanding claims of Rs 287.686 million it owes to the cement sector in terms of inland freight subsidy it announced to give from March to July in the year 2010, the cement sector is finding it difficult to sustain in this time of sever inflation.
In order to encourage exports, the government had decided to allow inland freight subsidy to the cement sector for the period from March to June 2010, but no payment has yet been made and to date there are outstanding claims of Rs 287.686 million. There are some benefits that are natural to the companies situated in the South Zone as they have easy and good accessibility to raw material being close to sea ports in Karachi. The cement units of the North zone are mostly in loss as they are denied inland freight subsidies by the government.
Another issue is the declining trend of exports to Afghanistan, which is no more a lucrative market. Total cement exported to Afghanistan amounts to 3.3 million tons in the 9 months of the current fiscal against 3.2MTs in the same period last fiscal, while exports to India stood at 0.48MTs this fiscal against 0.3MTs in the same period last fiscal. Clinker exports in the 9 months of last fiscal were 0.19MTs.