Iran Dismisses Pakistan’s Cement Dumping Allegation

EghtesadOnline: Pakistan Cement Manufacturers Association is urging the Pakistani government to slap up to 20% of import duties on Iranian cement, claiming that Iranian producers are “dumping” the industrial material in border markets.

News ID: ۷۷۳۵۷۹

30 January 2017

“The local market in areas adjacent to the Iranian border and the coastal area of Balochistan are flooded with Iranian cement. Domestically produced cement is losing its markets, as it is unable to compete with Iranian offerings due to their duty and tax evasions,” PCMA’s Chairman Mohammad Ali Taba was quoted as saying by the Pakistani daily The Nation.

Iranian producers, however, staunchly dismiss any dumping allegations.

“Accusing Iranian exporters of dumping is old news,” says the head of Cement Employers Association, Abdolreza Sheikhan. “Pakistani producers, who have higher energy costs, pressure their government every once in a while to expand their market reach.”

According to Sheikhan, Iranian cement is primarily exported to Quetta, the provincial capital of Balochistan and the closest Pakistani market to the Iranian border, Financial Tribune reported.

The city has no cement production and needs to import the industrial material, which consequently leads consumers to choose between Iranian offerings from just across the border, or local cement produced in that country’s northern provinces.

Pakistani producers’ high transportation costs render Iranians the more competitive and economic choice.

“Iranian cement is shipped at its finished price and not any lower,” said Sheikhan, adding that the volume of Iranian shipments to Quetta is “insignificant”, which does not constitute dumping.

According to IRNA, Pakistan imports about 600 tons of Iranian cement every day.

Dumping is the export by a country or company of a product at a price that is lower in the foreign market than the price charged in the domestic market. As dumping usually involves substantial export volumes, it often has the effect of endangering the financial viability of manufacturers or producers of the product in the importing nation.

Trade dumping can be identified by simply comparing the sales price of a good in its market of origin and the price listed in an importing market. It is considered intentional in nature in that the primary purpose is to gain an advantage within the market that imports the goods.

Mohammad Reza Ehsanfar, managing director of Zabol Cement Company, believes that what is perceived as dumping by other countries is in fact an unhealthy competition among Iranian producers due to a widespread lack of liquidity.

Engaging in dumping requires the government to subsidize the industry to make up for the lower prices and reap the benefits in the long run. The Iranian cement industry, however, is currently in the doldrums. And the government, too, is unable to help the sector.

What ensues is that producers, hunting for new markets due to depressed local demand, rush to export destinations and try to cut out competitors by slashing production and transportation costs. This competition ensnares everyone in a quagmire and shrinks profitability.

“From the outside, this looks like attempting dumping,” Ehsanfar said.

Iran is currently the world’s seventh largest cement producer as it dropped three steps last year due to its plummeting production. Production reached 58.6 million tons in 2015, down 12% year-on-year, according to CEA data.

Iranian cement plants’ 80-million-ton annual manufacturing capacity exceeds domestic demand by more than 30 million, according to data released by Planning and Budget Organization. This is while the Ministry of Industries, Mining and Trade has set the target of 60% growth for domestic cement output over the next decade to reach 120 million tons.

Exports are also envisioned to rise 68% to reach 32 million tons.

More than 15 million tons of cement and clinker were exported in the last Iranian year (ended March 19, 2016), with Iraq accounting for close to 65% of the figure.

Exports dropped markedly in April after the Iraqi government imposed a ban on cement imports.