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Lack of Liquidity Blamed for Cement Surplus

Lack of Liquidity Blamed for Cement SurplusLack of Liquidity Blamed for Cement Surplus

The annual 20-million-metric-ton sThe annual 20-million-metric-ton surplus in the cement sector together with theurplus in the cement sector together with the continuous stagnation in the capital projects have created gloomy days for the cement industry, reported Eghtesad News on Friday.

The lack of liquidity in capital projects, according to many market experts, is the main reason behind the surplus in cement production. The low demand in cement market has made producers to offer high discounts to keep their business afloat.

Ali Rabiee, the minister of cooperatives, labor, and social welfare, recently said that exporting cement to neighboring countries like Iraq could be a solution as it could create jobs.

Meanwhile, cement export to Iraq has recently fallen due to mismanagement of trade with the Arab country, which imported around 10 million metric tons of Iran’s cement in the year ending March 20, 2014.

The cement currently produced in Iran is cheaper than Iraq. The Iraqi officials, who import 70% of their cement needs, have recently imposed restrictions on the import of Iranian cement in order to protect their domestic industry.

Elsewhere, cement export to Afghanistan has also faced problems, as the Pakistani cement is considered as the main rival for the Iranian cement. Although Pakistani cement has lower quality its competitive prices attracts Iraqi clients.

Many Iranian analysts consider the export as a temporary solution to the cement industry, arguing liquidity injection into the capital projects is the only way to save the falling industry.

With an annual production of 78 million metric tons, Iran’s cement industry ranks third in the world after China and India and first in the Middle East, IRNA reported in November citing an industry official.

Neighboring countries like CIS nations are among major customers of Iran’s cement, since the low transportation costs, as a key factor in the pricing process, make the Iranian product competitive in those markets. Meanwhile, Tajikistan, as one of the suitable markets for the Iranian cement, has imposed higher tariffs on the product which has made it uneconomical to export the cement to the CIS countries.

The stagnation in the cement market began after implementation of subsidy reforms pushed energy costs higher, making business too costly for industrial plants, which are among major energy consumers.

Financialtribune.com