KARACHI: Prime Minister Imran Khan has formally inaugurated a polyvinyl chloride (PVC) plant of 100,000 tons capacity, installed by Engro Polymer and Chemicals Limited (EPCL).

The plant will enable import substitution of PVC – the world’s third most widely produced synthetic plastic polymer – and boost exports as well, according to a statement.

Speaking at the inaugural ceremony, PM Imran said that the government was pursuing policies to support expansion of local businesses, promote import substitution and boost exports.

He urged the business community to focus on import substitution and diversification of exports to support sustainable economic growth of the country.

Talking to The Express Tribune, AHL analyst Rao Aamir Ali highlighted that the domestic demand for PVC was around 280,000 tons per annum.

The construction sector was the biggest consumer of PVC, he said, adding that the use of PVC was increasing in other sectors as well.

The demand for PVC had increased from 182,000 tons in 2015 to 280,000 tons this year at a compound annual growth rate (CAGR) of 7.4%, the analyst underlined.

Considering 5% growth rate, the demand was expected to reach around 310,000 tons per annum by 2023, he estimated.

After expansion, the total capacity of EPCL had reached 295,000 tons per annum, but “local demand will still be higher than the production”, he pointed out.

The plant came on line in March 2021 and was formally inaugurated on Friday (December 10), Insight Securities analyst Muhammad Shahroz told The Express Tribune.

“The demand for PVC is increasing, therefore, the company decided to invest,” he said.

EPCL, being the only player, was trying to cater to market demand for 260,000 tons, he said, adding that the gap between demand and supply was being met through imports.

Echoing similar views, Sunny Kumar of Al Habib Capital Markets said that EPCL was the only manufacturer of PVC in Pakistan.

Giving details, he said that EPCL was manufacturing 195,000 tons of PVC (around 80% of total demand), thus 20% was being imported.

Considering the growing demand for PVC, the company decided to expand its production by 100,000 tons to 295,000 tons per annum, he maintained.

He highlighted that around 60% to 70% of PVC sales were made to the construction sector alone.

According to the statement, PVC demand in Pakistan has increased at a steady rate of 6% each year. “Besides PVC, the company also produces key raw material of caustic soda for the textile industry.”

The company is the only fully integrated chlorvinyl chemical complex and producer of PVC in Pakistan.

Since 2015, the company has invested over $188 million in plant expansion and other projects for higher efficiency, reliability, and diversification of operations.

The plant expansion had been completed with up to $50 million financing support from the International Finance Corporation and leveraged global expertise in project execution with a Japanese licensor and Chinese construction team, the statement said.

“With the addition of new capacity, EPCL can now produce 295,000 tons of PVC per annum to fully cater to the surging local demand, owing to the government’s favourable construction sector policies, and achieve exports as well.”

Through enhanced production, the company would now be contributing around $240 million to import substitution, while it has exported PVC resin worth $25 million to Turkey and the Middle East markets in 2021, as per the statement.

EPCL Chairman Ghias Khan said that the expansion would reshape the petrochemical landscape of Pakistan and support the government’s “Make in Pakistan” policy to promote export-oriented industrialisation.

KARACHI: The impact of mini-budget is being felt by the general public and the economy as a whole as prices of essential and luxury goods are going up.

Businesses have opted to pass on the impact of increase in taxes and duties to the general public.

Indus Motor Company (IMC), widely known as Toyota, has increased prices of its entire range of imported cars.

According to market sources, the automaker jacked up the rates following an increase in federal excise duty (FED) by the government in the recent mini-budget, aimed at easing the pressure on import bill.

The company raised prices of completely built units (CBUs) of numerous models including Hiace, Coaster, Corolla Cross, Prius, Rush and Camry.

Following the price jump, different variants of Hiace, that were earlier priced between Rs6-6.6 million, are now available at Rs6.3-6.98 million.

Similarly, the cost of different models of Hiace Deluxe has been raised from Rs6.9-11.1 million to Rs7.3-11.8 million.

The firm raised the price of Coaster by Rs810,000 to Rs14.81 million. Earlier, the vehicle was available at Rs13.99 million.

Toyota Corolla Cross, which could be bought for Rs7.7-8.4 million earlier, is now priced at Rs9.25-10.1 million.

The cost of Prius 1.8L jumped from Rs9.2 million to Rs11.1 million, an increase of Rs1.84 million.

Prices of Rush GMT 1.5L and GAT 1.5L models have spiked to Rs6.2 million and Rs6.4 million respectively, compared to the earlier rate of Rs5.6 million and Rs5.8 million.

The price of Camry variant has gone up by Rs2.7 million to Rs21.3 million.

“The price increase is mainly attributable to the jump in federal excise duty, regulatory duty and customs duty imposed under the Finance (Supplementary) Bill, 2021 as well as rupee depreciation, inflated shipment cost and rise in steel prices,” said Arif Habib Limited (AHL) analyst Arsalan Hanif.

Speaking to The Express Tribune, he projected further hike in rates of imported CBUs of cars because the upcoming automobile policy was likely to promote demand for locally assembled cars by turning imported vehicles expensive.

Endorsing his views, Insight Securities’ analyst Ali Asif stated that the jump in prices of imported CBUs came on the back of imposition and revision of federal excise duty on cars of different engine capacities to ease pressure on the import bill.

“Such levies will provide competitive advantage to our domestic manufacturers given that the increase in the cost of CBUs will trigger a drop in their imports,” added Asif.

Taurus Securities’ analyst Mustajab Ali Kazmi said “the spike in sales tax on imported hybrid vehicles from 8.5% to 12.5% forced the auto company to increase prices.”

Moreover, he added that rupee devaluation against the dollar also played a significant role in inflating the rates.

KARACHI: Pakistan’s textile companies are entering into contracts with foreign firms for the import of cotton as domestic stock of the commodity is going to end in February.

According to Karachi Cotton Brokers Forum Chairman Nasim Usman, the depletion of cotton stock in the country by the end of February will adversely impact the small textile mills.

“Such units will be forced to look for other options as opposed to the large textile groups that have signed cotton import deals with international companies as per their need,” he said.

According to the Pakistan Bureau of Statistics (PBS), textile exports grew significantly by nearly 26% year-on-year to $9.4 billion in the first half of current fiscal year 2021-22 and fetched 62% of the overall export earnings.

“Energy crisis is also affecting the output of textile mills in many areas, especially in Sindh and Balochistan,” said Usman. He pointed out that other export and non-export sectors of the economy were also enduring energy scarcity.

“Growth of the textile sector will seemingly slow down in the second half of FY22 due to multiple reasons including the lack of good-quality cotton and inconsistency in gas supply, resulting in production issues,” Topline Securities’ analyst Saad Ziker told The Express Tribune.

Ziker was of the view that the government of Pakistan should increase the target of cotton production to make better-quality cotton available in the market.

He added that the target was fixed below 10 million bales for the ongoing fiscal year whereas the overall requirement was more than 15 million bales.

The analyst emphasised that the shortage of cotton in the country would encourage imports of the commodity and further increase the import bill.

He was of the view that “the government needs to provide consistent energy resources to the textile industry because its production was suffering and export orders were at risk of delay”.

On the other hand, the value-added textile export industry of Karachi expressed disappointment over the government’s silence, indecisiveness and lack of response to the shortage of gas and re-gasified liquefied natural gas (RLNG).

He noted that despite repeated appeals by the businessmen, the government failed to take notice of the situation.

In a statement, Value-Added Textile Forum Chief Coordinator Jawed Bilwani said that factories had been receiving little-to-no supply of fuel for the past over 100 days, which brought the production of exportable merchandise to a halt.

“The government’s promises and commitment to ensure the supply of gas to export industries appear to be deceptive and false,” he added.

Arif Habib Limited analyst Arsalan Hanif said that cotton shortage was a normal phenomenon during January-February of every year because the local stock had been exhausted and industries relied on imports to fill the gap.

Although Pakistan’s cotton yield in the ongoing year was better than the previous year, the demand was much higher than supply, he stated.

Insight Securities analyst Ali Asif said “as per our channel checks, cotton stock will be exhausted in February and new stock will arrive in markets in June.”

“Most textile companies must have predicted the upcoming cotton shortage and stockpiled sufficient volumes to consume during the four months (March-June),” he said.

“If the textile industry is inking agreements for the import of cotton, which is 8-10% more expensive than the local cotton, it is likely to affect the companies’ gross margins because they cannot pass on the increase in cost to end-consumers,” he said.

“Firms have to keep their prices as low as possible to remain competitive in the international market.”

The Federal Board of Revenue has ordered a fact finding inquiry to investigate the failed attempt of emergency procurement under the $400 million Pakistan Raises Revenue Program (PRRP) through the World Bank. Sources said that Chairman FBR has designated Chief Commissioner RTO Rawalpindi  Dr Khalid Mahmood Lodhi to conduct a fact finding inquiry to investigate the failed attempt of emergency procurement under PRRP through World Bank. The ToR of the fact finding inquiry shall include revision of the original PC-1 vis-a-vis the hardware, software (quantities specifications and their prices built therein), deployment of Chief Information Officer (CIO) on the procurement work if this was not his job and non-revisioning of PC-1 when the CIO had identified procurement needs which may be over as listed in PC-I. The ToRs also included unprofessional handling of the assignment by the procurement committee members and overbooking of stuff on part of CIO, including mentioning of brands in the documents if it was not allowed.

KARACHI: The sales of di-ammonium phosphate (DAP) fertiliser, an important nutrient for agricultural land, recorded a sharp decline in November 2021 on account of inflated prices.

According to the monthly data released by the National Fertiliser Development Centre (NFDC) on Monday, DAP offtake fell 40% year-on-year and 36% month-on-month in November on account of higher prices at the end of Rabi season.

During January to November 2021, DAP offtake stood at around 1.76 million tons against 1.96 million tons in the same period of last year, he added.

The decline in offtake is attributable to the significant rise in DAP rates.

To note, DAP price in November 2021 soared to Rs8,015 per bag against Rs3,985 per bag in the same month last year, showing an increase of 101%.

On a monthly basis, the price jumped 16% amid increase in international prices and rupee devaluation.

“The drop in DAP sales came on the back of sharp hike in its price,” said Insight Securities analyst Muhammad Shahroz while speaking to The Express Tribune. “Furthermore, demand of nitrogen phosphorus (NP), nitrogen phosphorus potassium (NPPK) and calcium ammonium nitrate (CAN) fertilisers witnessed an increase during the month compared to the same period of last year.”

However on a monthly basis, all three products recorded a decline, the data revealed.

The sales of NP fertiliser climbed 17% year-on-year from January to November 2021, he said. Furthermore, significant rise in DAP prices also enhanced sales of NP.

Currently, the price ratio of NP and DAP equals to around 67% while the three-year average amounts to 77%. However, the absolute difference between prices of DAP and NP amounts to around Rs2,600 per bag.

The demand of CAN remained robust in first 11 months of 2021 and clocked in at around 831,000 tons. The sales of CAN fertiliser were recorded at 579,000 tons in the same period of last year.

On the other hand, the sales of urea ticked up by 8% year-on-year and 12% month-on-month to 574,000 tons in November.

During November 2021, total urea production stood at around 532,000 tons against nearly 515,000 tons in the same period of last year, showing a meagre increase of around 3% on a year-on-year basis.

The cumulative sales during January-November 2021 stood at 5.74 million tons as opposed to s5.15 million tons in the same period of last year, showed the report. The increase in urea demand is attributable to improved agronomics and lofty buying from dealers.

“Currently, the availability of urea is a major concern in retail markets as it is being sold at a hefty premium despite smooth operations of fertiliser manufactures,” Shahroz said.

Executive Director Fertiliser Manufacturers of Pakistan Advisory Council Sher Shah Malik told The Express Tribune that urea sales increased 15% from September 2021 onward while DAP offtake witnessed a contraction of 4%.

KARACHI: Contrary to the usual trend in every December when automobile sales drop due to the seasonality factor, car bookings in December 2021 recorded a sharp growth of 96% to 27,331 units compared to the same period of previous year.

“Normally, automobile sales decline at the end of each year but this time around the scenario is different,” said Arif Habib Limited (AHL) analyst Arsalan Hanif while talking to The Express Tribune on Tuesday.

On the one hand, vehicle manufacturers increased car prices but on the other, consumers booked cars in anticipation of a hike in prices following the approval of mini-budget and that created a balance in the market, he said.

He cherished that sales growth came despite shortage of semi-conductors, disruption in the international supply chain and suspension of booking of certain models by the automakers.

Pent-up demand coupled with expectation of an increase in car prices, after approval of the mini-budget, contributed to the phenomenal growth in the automobile sector last month, remarked AL Habib Capital analyst Sunny Kumar.

The improvement in supply chain also drove the increase in car sales, he noted.

Despite the interest rate hike from 7% in July 2021 to 9.75% in December 2021, the auto financing in Pakistan continued to rise and soared to an all-time high of Rs349 billion in November 2021, said Kumar.

“Due to the seasonality factor, auto sales generally fall in December every year,” said Insight Securities analyst Ali Asif. “However, in the past month, the primary contribution to the uptick in automobile sales came from Pak Suzuki Motor Company.

He pointed out that the company overcame the problem of chip shortage, resulting in higher overall car sales in Pakistan.

The robust growth was led by the tax relief announced in the budget for 2021-22, said Kumar.

Launch of new models and a recovery in the overall economic activity also played a vital role in propping up the vehicle bookings.

Citing that sales increased due to a reduction in federal excise duty and sales tax, favourable interest rates, conducive economic environment and the launch of new models, he expected car bookings to fall in future on the back of monetary policy tightening and fiscal adjustment.

Moreover, the recent price rise and a twofold increase in federal excise duty will discourage people from buying new models.

ISLAMABAD: In the past three and a half years, the local currency has depreciated by around 31% against the US dollar to stand at Rs175.86 in the inter-bank market on Friday (February 18).

Experts believe that this devaluation has tremendously increased inflation besides raising the country’s debt to an unsustainable level.

The Express Tribune takes a look at the impact of the deprecation on multiple sectors.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) official Ahmad Jawad lamented that despite a surplus in the current account and robust home remittances last year, “Pakistani rupee failed to witness any sizable correction”.

Does the government not realise what the country has suffered during the past 3.5 years in the wake of 31% currency devaluation, he questioned.

“The foreign exchange reserves, held by the State Bank of Pakistan (SBP), stand at around $17 billion,” he mentioned adding that $2 billion were on way from international lenders which would be reflected in the data within two to three months.

Still, the exchange rate continues to hover at 175 against a dollar, he lamented.

“This shows that we are being forced to depreciate the local currency by the international donors and it is an agenda against Pakistan to weaken the economy,” Jawad held the view.

Prime Minister Imran Khan should understand that rupee appreciation was direly needed for economic recovery of the country.

If the local currency failed to gain ground, the country would remain in the grip of skyrocketing inflation and surging commodity prices of products ranging from automobiles to food items.

Talking about the automobile sector, he pointed out that the local industry took the advantage of rupee depreciation and revised the prices of cars upward by around 70% despite the fact that the assembly plants were located in Pakistan and only a few parts had to be imported.

Moreover, the prices of essential medicines have risen as well, he noted.

Citing a study, which analysed the price trends of 120 randomly selected medicines, Jawad observed that a major jump was witnessed in 2019 as the average price of the sample soared to Rs585 against Rs410 in 2018.

He recalled that the Drug Regulatory Authority of Pakistan (DRAP) allowed 15% price hike on medicines in 2018 due to abrupt devaluation of the rupee.

The rates of active pharmaceutical ingredients of common medicines, being imported from China, soared due to the rupee depreciation, Jawad pointed out.

In August 2018, the local currency was standing at Rs123 a dollar, which had devalued to Rs178 in January 2022, he recalled adding that the nation witnessed one of the steepest depreciation during the 3.5 year period in history.

“The only other sharp devaluation of local currency occurred when Dhaka (Bangladesh) was separated from Pakistan,” he stated. “At that time, the local currency depreciated by 58% from Rs4.6 a dollar to Rs11.1.”

He reiterated that the recent slump in the local currency was “dictated by the International Monetary Fund (IMF) and it has nothing to do with macroeconomic fundamentals”.

Detailing the performance of the regional currencies, he underlined that the Indian rupee was standing at Rs70.09 against the US dollar in 2018 and it now stood at Rs75.39.

The Bangladeshi taka fluctuated in the range of 84 to 85.9 a dollar (on an average) in the past two years and it was currently standing at 85.76 against the greenback.

Insight Securities analyst Ali Asif was of the view that the manufacturing sector bore severe brunt of rupee depreciation.

The fall in the value of local currency lifted the cost of production which eventually led to an additional price burden on the end consumers, he added.

“We have noticed persistent increase in car prices on the back of rupee depreciation, as most of the raw material, particularly cold-rolled coil (CRC) for flat steel, is imported.”

On the flip side, the slump in rupee value greatly aided the textile exporters in posting better profit margins, he underlined.

“Although the sector imports some of the raw material, the devaluation of rupee lent it all-out support,” he added.

Echoing his views, Arif Habib Limited (AHL) analyst Arsalan Hanif said that rupee’s devaluation against the greenback mainly facilitated the textile sector.

“It gives the textile exporters a competitive advantage over other countries, in terms of pricing, labour charges and profit margins,” he said, adding that the sector was witnessing a double-digit growth in exports.

On the other hand, the automobile sector was the worst affected from the slump in the rupee value, as “the industry imports most of its parts from abroad”, he underlined.

Therefore, car prices in Pakistan increased by more than 50% in the past three years, he added.

“The auto sector can easily pass on the impact of costly raw material to end-consumers due to strong pricing power of auto companies,” he said. “This has already been witnessed in the past.”

Talking about the textile industry, Topline Securities analyst Saad Ziker noted that the diversion of foreign orders to Pakistan from regional countries, amid the Covid-19 pandemic, also played a key role in lifting the textile exports besides devaluation of local currency.

The textile exports touched $9.4 billion in the first half of 2021-22, he said adding that the rupee depreciation coupled with higher cotton prices helped the sector reach this level.

“Textile sector is the biggest beneficiary of rupee devaluation,” he remarked.

Referring to the pharmaceutical industry, he mentioned that the companies urged the government to increase the prices of medicines, as the majority of active pharmaceutical ingredients were being imported by the firms.

Citing examples, he said that recently the cost of raw material used in Paracetamol (medicine) increased which led DRAP to approve around 40% hike in its price, from Rs1.9 to Rs2.7 a tablet.

Insight Securities analyst Saad Hanif underlined that the slump in the value of rupee had significantly increased the production cost of the industries, as “they mainly import coal for their operations and it constitutes around 40-45% of their cost of goods sold”.

A senior analyst of the cement industry, Saqib Hussain, was of the view that the rupee devaluation had increased the cost of manufacturing by Rs100 a bag (cement) in the past three years.

Topline Securities analyst Mehroz Khan said that following the outbreak of Covid-19, the global steel industry faced multiple challenges as the commodity super cycle had a grave impact on the sector.

This resulted in higher working capital requirements and also restricted volumetric growth due to inflated prices.

“Before Covid-19 struck Pakistan, the steel industry was already reeling from the impact devaluation of the local currency because it relies on imported raw material,” he said.

Citing that since December 2017 to date, the input cost of the long steel industry surged 142%.

Talking about flat steel, he stated that there was a rise in the input cost (landed raw material) by 154% out of which 102% came on the back of weakening of the local currency.

“Same goes for the cement sector whose raw material cost skyrocketed 229%, with currency devaluation holding a share of 132%,” he said.