Cheaper Afghan coal comes to rescue cement sector

ISLAMABAD, March 10:  Falling share prices of cement sector in localbourse bounced back for the second consecutive day as relatively cheaper Afghancoal provides the much needed support. According to a report of FoundationSecurities, international coal prices have touched an all time high of $460 pertonne, surging around 114 percent in the last 3 weeks. This has forced localcement players to switch towards other resources where Afghan coal has taken alead by cutting down input cost and providing a breathing space.Players like Cherat Cement, LuckyCement, and Maple Leaf Cement Factory (MLCF) have switched to 60-70 percentusage of Afghan coal while Pioneer Cement’s usage stands at 40-50 percent andDGKC is using 20-30 percent of Afghan coal in the northern region. Similarly,other players are also meeting a major portion of their overall coalrequirement from Afghan origin coal.According to the brokerage, Afghancoal used to trade at 25 to 30 percent discount to Richards Bay Coal (RB1)until a few weeks ago. This differential has increased in recent days postsignificant jump in RB1 prices.As per market sources, on-sitedelivered Afghan coal price in the north currently stands at around $235 pertonne. This indicates that delivered prices are less than 50 percent of SouthAfrican comparable coal. Similarly, usable domestic coal trades at around $170per tonne i.e. at 64% discount to RB1, Foundation Securities cited.According to AKD Research, monthly availability of Afghan coal ranges from 0.2-0.25 million tonnes while localcoal’s availability is in the range of 0.1-0.125 million tonnes. North’smonthly demand of coal at 0.42-0.45mn tons currently; hence, the northernregion can easily replace 65-70 percent of its coal requirement through Afghancoal.However, limited coal inventory andthe unreliability of the supply chain of Afghan coal pose a risk onsustainability . -TLTP