PAKISTAN: Cement sales likely to decline by 4% in Nov

KARACHI: Cement dispatches for the month of November 2010 are expected to decline by 4 percent year on year (YoY) to around 2.4 million tonnes compared to 2.5 million tonnes in the same period last year, industry sources told Daily Times. 

The major decline is likely to be seen in exports which fell by 9 percent to 0.7 million tonnes versus 0.77 million tonnes last year, while local dispatches remained flat to 1.7 million tonnes compared to 1.7 million tonnes seen in November 2009.

With these numbers, cement dispatches in 5MFY10 fell by 10 percent YoY to 12.5 million tonnes compared to 13.9 million tonnes. During the period, exports eroded by 19 percent to 2-year low of 3.9 million tonnes versus 4.8 million tonnes while local dispatches fell by 6 percent YoY to 8.6 million tonnes compared to 9.1million tonnes in same period last year.

“The decline in exports was due to declining sales to Middle East and a complete halt in exports to India amid expiry of BIS certificate (Bureau of Indian Standards) quality assurance certificate from Indian authorities,” Furqan Punjani, an analyst said. Similarly, slowdown in demand amid recent floods remains the major reason behind decline in local dispatches. 

Analysts expect cement dispatches to improve from 2HFY12 with major contribution from local demand once reconstruction activities begin. 

Coal prices on the rise after floods in Australia: Floods in Australia, the world’s biggest exporter of coal, have caused production disruptions from the mines in Queensland. This in turn has resulted in an upward pressure on the international coal prices. Coal prices have shot up to $117 per tonne, (up 8 percent since December 1st) highest since October 2008. Though the rising prices remain a concern for the local cement manufacturers, analysts have already assumed an average coal price of $102 per tonne in FY11. So far this year, coal prices have averaged $97 per tonne. If coal prices average $110 from now, it still would be at par with full year assumption. 

Moreover, with the bulk of Pakistan’s coal imports coming in from South Africa and Indonesia, analysts remain slightly protected. Lucky Cement (LUCK) is likely to be least affected due to the presence of a long-term contract with its suppliers.