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Rising coal cost perturbs cement makers

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Rising global coal prices have badly affected the cement industry in Pakistan, which is under severe pressure to stay afloat amid rising input costs.

Talking to journalists, cement sector officials pointed out that the industry had been using coal as fuel for clinker manufacturing since 2004, which it imported from South Africa, Mozambique, Australia and Indonesia.

Supply of local coal to meet requirements of the sector was not sustainable due to the lack of infrastructure and its inferior quality, they added.

The cement sector imported around eight million tons of coal every year to meet the domestic demand for cement, which would grow by four million tons in the next two to three years, they said, adding that the industry was increasing its annual production capacity from 70 to 100 million tons by the end of 2022-23.

Global coal prices have touched an all-time high of $224 per ton free on board (fob) in October 2021, around four times higher than $55 a ton in July 2020, thus adversely affecting the production cost of cement, they lamented.

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Ocean freight from South Africa to Pakistan has also increased to $30 per ton in October 2021 from $13 a ton in July 2020, they added.

The surge in the US dollar also played its role in increasing the overall fuel cost by almost 100%.

In July 2020, the cost and freight (C&F) price of coal for local cement manufacturers was $68 per ton, which increased to $254 a ton in October 2021.

The impact of devaluation of the local currency was calculated at Rs119 per bag of cement, they said.

For cement manufacturers, coal was not only an essential fuel source but was also the largest cost component in the manufacturing process besides electricity, they said, predicting that coal prices would continue to rise till February 2022 and might hit the $300-a-ton mark.

Published in The Express Tribune, October 21st, 2021.

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