The Indian cement industry would not be impacted by import of cement from Pakistan. A Macquarie Research report on cement said that cement prices should maintain their upward trend for the next 12-15 months, until some large greenfield projects come on-stream.

The Pakistan cement industry has almost doubled its capacity to approximately 40m tonnes in the last two years and is believed to in a large surplus zone. Pakistan has witnessed 18% CAGR growth over the last six years and this year the demand is showing a run-rate of 24%.

The key driver of cement demand in Pakistan other than the housing sector is the government spending under the a Public Sector Development Programme. We estimate surplus to be roughly 14-15m tonnes but it is likely to reduce as cement demand catches up, the report said.

The brokerage expects the extent of imports to be limited and not impact current market dynamics. The reason for this is said to be the presence of several logistical bottlenecks.

We estimate that only 0.5-0.6 mtpa of cement imports are possible into India on the presently-available infrastructure. There is only one railway line between India and Pakistan. These (railway infrastructure) are also not well maintained as only smaller rakes of 1200n can be handled at one go. Recently, the Indian government has allowed transfer of cement from Pakistani trucks into Indian trucks at the border, but it remains a time-consuming and labour-intensive operation, the report added.

The key limiting factor in sea route import is the lack of dedicated infrastructure to handle bulk cement at Indian ports. This leads to import of only bagged cement in containers and seriously limits the size of the transhipments. More so, when Indian ports are running at a high capacity utilisation of 95% and chances of demurrage is high, states the report.

The report also quells the notion that imported cement is cheap; In spite of reduction in import duties and other taxes, imported cement is not very cheap. Even supplies near to the border or ports are costing Rs 207 per bag, which is roughly 5-10% cheaper than lower brands in the market, the report points out.

We anticipate a deficit of approximately 5 mn tonnes for FY08 and believe that imports of around 0.5-0.6 mn tonnes can hardly dampen the cement market, states the report. The brokerage, on the whole, is bullish on cement sector; Grasim Industries and Ambuja Cements being the top picks.