Pakistan cement producers face higher coal prices

Rising coal prices are presenting a risk to profit margins of cement manufactures in Pakistan. According to a local research house report, coal prices in the global markets have been on an upward trend (up 18 per cent from last July), after touching a trough at US$40/t on 16 February. It is expected that this sustained rise in coal prices will increase the cost of cement production in the short-term.

Major contributory factors to the higher coal prices include China's imposition to cut production to 276 days to reduce the supply glut (since October 2016)whle extra safety check are resulting in tightened domestic coal supplies in the country. Moreover, tropical storms in the Atlantic basin and floods in Australia and Indonesia are giving rise to logistical issues and as a result, are leading to restricted supply. In addition, nuclear outages in France are driving extra demand.

To add to the already worsened supply situation, more recently South Africa's National Union of Mine workers (NUM, representing 70 per cent of employees in coal mining sector) has announced a strike beginning from 19 November 2017, due to unresolved wage disputes. This is expected to lead to further pressure on the supply side during the high-demand season with coal prices predicted to increase further.