Cement manufacturers mull price hike

Cement manufacturers mull price hike

KARACHI: Cement manufacturers in Pakistan are considering increasing prices after the government increased the rates of electricity and enhanced the rate of general sales tax (GST), industry sources said on Tuesday.

“Cement manufacturers may increase the price of cement by Rs35-40 per 50 kilogram bag,” an office-bearer of the All Pakistan Cement Manufacturers Association said, requesting anonymity.

The price (under consideration) would be increased in order to pass on to consumers the impact of the hike in rates of electricity and GST, the official said. Earlier, the government had increased GST by one percentage point to 17 percent and electricity by Rs3.0-6.6/kwh for industrial users.

The official said that the price of paper, which is used to make cement bags, has also gone up after the surge in the GST rate. Walibhai Patel, a Karachi-based cement dealer, said cement is being sold at Rs450-480 per bag in Karachi depending on the brand.

However, Yawaruz Zaman, an analyst at Shajar Capital Pakistan, calculated that cement manufacturers may increase the commodity price between the range of Rs15-20 per 50 kilogram bag. He said that some cement manufacturers were generating electricity themselves, which is why the price would not be dramatically increased.

“Based on our discussions with industry experts, we believe cement prices can increase by an average of Rs15-20 per bag,” he said.

“Paper calculations suggest an RsR30-35/bag impact on cement manufacturing cost as a result of adjustment in the electricity tariff. However, based on companies’ in-house power generation capability there will be a different impact on individual companies,” he said.

At one end of the spectrum is Lucky Cement with 100 percent in-house generation while Fauji Cement, and Lafarge Pakistan Cement reside on the other extreme. DG Khan Cement, Maple Leaf Cement and Kohat Cement rely around 40 percent, 45 percent, and 50 percent on commercial electricity, respectively.