High coal prices increase industry’s cost of production

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LAHORE  –  High import duty and around 15 percent rupee depreciation against dollar have increased the rates of imported coal to 11-month high of $108 per ton from $92 per ton, leading to increase in cost of production for the local industry.

Industry experts are of the view that because of the rupee depreciation and rising coal prices in the international market, the industry has no choice except to again shift on the national grid which would cause additional burden on the power distribution companies, besides increasing cost for the industry.

According to analysts, rates of coal in the global market have surged by 35 percent, which has jacked up production cost of the cement industry and if the manufacturers continue the previous profit margin when the rupee was stable, they would have to increase prices by Rs100 per cement bag of 50kg.

They urged the government to immediately review the issue of high duties on coal import. The industries that rely on coal as a source of fuel for production, such as energy and cement, are predicted to suffer heavily. The cement industry has also expressed its concern over sharp rise in coal and fuel prices, impacting the cost of production of cement.

Experts said that China’s coal prices hit their highest levels at 652 yuan ($102.7) a tone this week, fuelled by concerns over tight supplies and robust demand at utilities.

According to industry experts, higher coal as well as fuel prices have decreased local cement industry’s profit margin, as coal constitutes more than 30 percent to the total production costs. Experts said that coal prices have been gradually increasing for the last one year, when China, the world’s largest coal producer, importer and consumer, imposed supply side measures to limit its coal mining capacity. Experts suggested that the government should avoid disruptive policies that impact construction growth in the country.

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