KARACHI, Aug 30: Lucky Cement Limited announced on Friday that its coal firing plant had been commissioned, switching production to 100 per cent coal. The company was the third, after Pioneer and Dandot to have switched all of its output from furnace oil to coal.

But Abdur Razzaq Thaplawala, executive director at Lucky Cement told Dawn that his company was the first to have installed a “brand new” Coal Firing System. “Lucky’s Coal Firing System is the first brand new system which includes Crusher, Stacker as well as Reclaimer for proper homogenizing and mixing of different qualities of coal”, Thaplawala claimed. He said that the capital cost of the plant amounted to Rs350 million, which the company had generated through internal resources and low-cost short term borrowings. By switching over to 100 per cent coal, Thaplawala said, the company would be saving the country foreign exchange of around $15 million a year, which otherwise would have been paid for import of furnace oil.

High cost of furnace oil has been driving cement manufacturing companies in Pakistan to collectively convert from furnace oil to coal. Of the 22 cement plants in the country, an overwhelming number have already begun to shed dependence on furnace oil and draw between 30 to 70 per cent of energy from coal. The leaders among the lot expect to have been fully converted by the end of the year. The executive director of Lucky Cement estimated that the industry would cut cost of production by Rs400 per ton, as it switched over to coal; on the current 60 per cent capacity utilization, the cost benefit works out to Rs250 per ton.

Due to the inferior quality of local coal, it has to be blended with imported stuff. The import of coal has gone to raise several eyebrows as critics say that foreign exchange spent on import of coal would nullify the benefit of fuel substitution. Industry leaders nonetheless, argue that cement plants are currently operating on 60:40 and 70:30 import to local coal blending. “But even if plants were to operate on 100 per cent imported coal, it would still save the country some 80 million dollars in foreign exchange”, Thaplawala argues showing the working on a graph.

Currently, the Karachi Stock Exchange has 22 listed companies on the cement sector with aggregate paid-up capital of Rs24.7 billion. The sector market capitalization stands lower at Rs18.1 billion, since all but seven cement stocks are trading at varying discounts to their par values.

The third quarter financial results by cement companies showed an overall improvement over the half term numbers, which analysts said was primarily because of ‘seasonality’ as cement offtake peaks in the third and fourth quarters. Other factors were stated to be marginal increase in output prices (due to the cement cartel) coupled with increasing benefit of switching from furnace oil to coal. The full year to end-June accounts would be due in autumn. Operating at no more than 60 per cent capacity, the profitability of cement companies for all of the year, is not expected to be too rosy.

Prospects of large scale exports of cement to Afghanistan, has proved all but “irrational exuberance”. Pakistan has managed to export just about 140,000 tons in the eight months period, which industry analysts say is ‘pittance’ and does nobody any good.