October 14, 2021 (MLN): To absorb the impact of Rupee depreciation and rise in international coal prices, Cement manufacturers are expected to increase cement prices by Rs25 to Rs30 per bag of 50kg, industry sources said.
Currently, the cement price is ranging from Rs670 to Rs710 per bag.
The growing trend in coal prices is denting cement companies’ profitability as they are using coal as fuel in the manufacturing of cement.
Currently, FOB coal price stands at around US$247 per ton, Ocean freight also increased to US$30 per ton from US$11 per ton, while C & F coal price is around US$277 per ton.
Coal prices since July 01, 2021, increased by 111 percent, while Pak Rupee depreciated to Rs172 against USD. The overall impact of rising in coal prices from July 01, 2021 in Pak rupee works out to Rs. 142/ bag.
The upcycle in coal prices started with a rebound in global demand as electricity demand increased in developed countries while natural gas/LNG supply could not keep pace, resulting in power production shifting towards coal. The increase has intensified as we approach the winter season as prices in 3QCY21 increase by 34.1% on a QoQ basis against 15.2% in the preceding quarter.
Fuel to the fire was added by increased buying from China which had earlier released inventory from its coal reserves to stabilize local coal prices, a report by AKD securities said.
Moving forward, efforts are underway to curtail the increase in coal prices with China asking its local mines to increase output while recent news items suggest supplies have been procured for the winter season.
To note, China’s coal imports surged 76% in September. This October 14, 2021 coupled with a decrease in demand in developed economies post-winter will result in coal prices abating.
According to the report, the aforementioned decrease will be a relief for local cement manufacturers after they have struggled to pass on the impact of the increase in coal costs where despite the recent increase of Rs50/bag. Moreover, if coal prices remain around USD200/ton for the remainder of FY22, another PkR80-90/bag will need to be increased in order to fully pass on the cost.
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