The first consignment of cement from Pakistan is expected to cross the Indian border in the next two weeks, to satiate a rising demand
MUMBAI: The first consignment of cement from Pakistan is expected to cross the Indian border in the next two weeks.
India recently agreed to import cement from its arch-rival to satiate the increasing domestic demand, spurred by a booming housing industry and infrastructure development programmes.
But interestingly, this supply from across the border with neither fulfill India’s needs nor bring down cement prices. “The Karachi Port has the capacity of 7,000 tonnes per day and can import up to 2.55 million tonnes per annum, which hardly makes an impact on Indian cement firms,” said an analyst with Alchemy Share & Stock Brokering firm.
Even if Pakistan exports this full capacity, it would still be 2% lesser than the daily Indian consumption.
India has an installed capacity of 165 million tonnes and faces a shortfall of around 10 million tonnes. Cement prices, on the other hand, are already at an all-time high, with
one bag costing Rs 250 in Mumbai.
Worse still, the prices are set to rise further in September. Analysts with domestic brokerage firms say cement prices will rise further in September even after the imports, due to demand-supply mismatch.
Pakistani cement makers are eyeing a big market in India. Pakistani commerce secretary Syed Asif Shah said the first tranche of cement would arrive in India by the end of August.
But there’re many hurdles before them. A cement analyst who did not wish to be named said, “Even the option by road or rail does not make economic sense. Moreover, importing from the Wagah border needs many security clearances.”
Logistics, say experts, will be a big issue. Imports could come through Kandla, Mumbai, Kochi, Chennai, and Vizag, but transporting stocks over longer distances from ports would increase the freight charges by up to Rs 1,000 a tonne beyond a distance of 200 km.
Lucky Cement, the largest cement producer in Pakistan, would be an important player, but others like DG Khan Cement Co, Bestway Cement, Maple Leaf Cement and Attock Cement may come under margin pressure due to high freight costs.
“Cement prices may rise further by Rs 3-5 per bag after the monsoon,” said A K Saraogi, CFO & president (corporate affairs), J K Cements, in a analysts’ teleconference earlier this month. Meanwhile, cement prices went up by nearly 45% between January 2006 and July 2007.
The average cement price in January 2007 stood at Rs 209 per bag while in July, it went up to Rs 229 per bag.
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