Daily Times

KARACHI: The northern market of cement industry has reduced retail prices by Rs 25/bag. The reduction is largely adjustment in Maximum Retail Price (MRP) to the discounts that industry started offering in recent times.

Lucky Cement took the lead and revised its varying brands prices to average around Rs 525/bag. However, cement players in north were already giving discounts to Rs15-20/bag that also reflected in previous month high dispatches growth. Hence, reduction of market retail price is largely adjustment to align MRP with prevailing prices (including recent discounts offering).

“We believe, the reduction in MRP suggests sustainable reduction in prices contrary to the previous approach of offering discounts, the situation of cement prices risk would sustain for longer tenure as new capacities are likely to come online in near term”, said Foundation Securities’ analyst.

Furthermore, southern region is adding 5 million tons into existing 8.6 million tons in second half of ongoing fiscal, and the impact may lead to northern market (especially south/central Punjab) owing to available arbitrage to transportation from south.

As per the recent price notification to its dealers, Lucky cement has cut its MRP by Rs 25/bag to Rs 525/bag, effective from 17th August 2017. While retention price of the company had already taken a hit of Rs 15/bag during the latter part of July 2017, the primary reason behind the official cut in MRP is to manage cash flows of the company to avoid additional sales tax, said industry sources.

Khyber Pakhtunkhuva (KPK) is the most affected region from current price attrition primarily due to re-initiation of price discounts by Cherat Cement and Bestway Cement, while in Punjab (the hub for cement demand) retail prices have retreated by only Rs 5-10/bag since late July.

Published in Daily Times, August 22^nd 2017.