In Pakistan, the experts recorded that cement demand is closely connected to the overall economic growth, particular the infrastructure and housing sector. Pakistan’s Public Sector Development Projects (PSDP) allocation plays a significant role in driving the demand of cement. Government of Pakistan annual allocation of PSDP and utilization of the same plays a critical role on demand for cement. They also recorded that slowdown in economic activity in Pakistan affects cement demand on the back of slowdown in construction and development activities. Consequently, the industry remains exposed to high cyclicality risk.
The Government of Pakistan focused initiatives on housing and infrastructure development and incentives proclaimed under the construction package will lend support to the construction sector and expected to provide boost to the cement sector. It is also recorded that this industry vulnerability to technological change remains low given limited product line without much room for research and innovation. Product obsolescence is also low in this sector. While there is a push for adopting technologies for energy conservation and improvement in environment, the pace of change in the domestic industry is slow and therefore technology risk for cement sector remains limited. Cement sector is considered one of the more energy intensive sectors of the economy. Energy costs account for 50 to 60 percent of total production cost for cement manufacturers. Present statistics identified that Pakistan’s cement and clinker exports have declined in the first 7-month of the FY2022. According to local experts, historically, when local demand is booming, exports take a backseat, and when the local market is slowing down, exports contribute a critical share in total sales. It makes more economic sense to sell locally where prices are more desirable and less competitive.
The Indian supply has not been restored to date, and there is no momentum in dispatches to Kabul. The Pakistan cement industry earned US$160.926m in export revenue through dispatching 4.315mt of cement and clinker overseas in the 7-month of the FY2022 as against to US$163.67m from 4.93mt of exports in the year-ago period. As a consequence, the sector saw a nominal slide of 1.7 percent in dollar terms but reported a double-digit fall of 12.5 percent in volume during the export period. However, exports valued in Pakistani rupees saw a growth of 3.1 percent to Rs 27.58bn during the period under review.
It is also identified that the country has been exporting clinker/cement to Bangladesh, Sri Lanka, Afghanistan, Madagascar, South Africa, Tanzania and India. During January 2022 alone, export revenues declined 44 percent MoM (month on month) to US$17.15m on the shipment of 393,347t as against to US$27.77m from 702,698t of exports in December 2021. However, when compared with January 2021 earnings of US$20.74m from 607,640t, this showed a drop of 17.3 percent and 35.3 percent YoY in value and quantity, respectively. According to the ministry of finance report, irrespective of the apprehensions caused through covid-19, the country’s cement industry has continued to grow on the back of well in time government initiatives.
The Government of Pakistan has introduced an incentive package for the construction industry in April 2020, which stimulated the industry mainly the private sector housing projects. A significant increase in FDI and LTFF for construction sector also bodes well for the sector. Cement industry statistics showed, has recorded the highest ever Y-o-Y (year on year) growth of 44.6 percent in March FY2021 because of massive rise in local consumption also exports. Total cement dispatches reached at 5.381 mt as against 3.719 mt last year. Domestic consumption grew by 42 percent to 4.563 mt asAP against to 3.213 mt in March FY2020.
The export trend showed a substantial growth of 61.6 percent to 0.818 mt dispatches in March FY2021 as against to 0.506 mt during last year. Northern Region Domestic consumption in the north grew by 38.6 percent in March FY2021, recording 3.809 mt dispatches as against to 2.749 mt dispatches in the corresponding month last year. Exports from north-based mills recorded an enormous rise of 162.6 percent as the volumes increased from 0.106 mt in March FY2020 to 0.280 mt in March FY2021. Southern Region Domestic consumption in the south increased by 62.3 percent and reached to 0.753 mt in March FY2021 as against to 0.464 mt in March FY2020. While exports from the region grew by 32.5 percent, from 0.400 mt in March FY2020 to 0.530 mt in March FY2021. Statistics showed that cumulative dispatches total local dispatches during July-March FY2021 grew by 18.3 percent to 36.2 mt from 30.6 mt previous year. While total exports grew to 7.1 mt from 6.4 mt during the corresponding period last year.
According to data released by the All Pakistan Cement Manufacturers Association (APCMA), local dispatches from the northern region grew by 17.7 percent while southern region dispatches surged by 21.3 percent during July-March FY2021. Exports from the north edged by 0.2 percent while south came up with 15.5 percent growth during the period. Cumulative dispatches (local & exports) recorded a growth of 17 percent and reached to 43.325 mt during July-March FY2021 as against to 37.035 mt in the same period. On the other hand it is also analyzed that cement sales contracted 4.75 percent in February 2022 and stood 4.36mt as against 4.57mt in the same month of previous year. According to APCMA, local sales by the cement industry stood at 3.95mt in February 2022, which was 0.17 percent lower than 3.96 million tons in February 2021.