Pakistan: cement sector capacity utilisation lowest in 10 years

Pakistan: cement sector capacity utilisation lowest in 10 years
Published: 09 January 2012

The capacity utilisation of cement sector reached its lowest at 69.67% in past one decade in the first two quarters of 2011-12 that ended on 31 December 2011 while exports continued to decline offsetting the gains in local consumption.

The cement industry ended the year 2011 not on a very encouraging note. The capacity utilisation of the industry stood at 81.53% in 2007-08 that has gradually declined to its present level, giving nightmares to the cement manufacturers.

“The expected turn around in the economy did not materialise as the capacities of the sector continued increasing,” said a spokesman of All Pakistan Cement Manufacturers’ Association (APCMA). He said that expansions in cement sector were planned six years back when the economy was moving. The prolonged recession of recent years and drying of government development programmes have played havoc with the viability of the cement sector.

He said that the domestic demand in December was encouraging, showing a growth of over 13%. This compensated to some extent the decline of 5.12 percent in local demand in November. He said that exports, however, remained under pressure during the last six months posting decline in four of the last six months. The exports declined by over 8% in December. The overall decline in exports stood at 4.58%during July-December 2011 period.

Cement units located in South registered a healthy growth of 19.2% in the local market but posted even higher 20.02 percent decline in exports in the first six months of this fiscal. The majority of the cement capacity however is located in the north where the industry posted a modest gain of 6% in domestic market and even lower increase of 2.51% in exports.

The total cement despatches in the first two quarter of this year was 15.4Mt, which was 4.21% higher than the cement despatches of 14.78Mt during corresponding period last year.

During the 1st quarter of current fiscal year, seven cement units suffered loss before taxation aggregating to INR0.973bn, while eight cement units, of which three are located near Karachi in close proximity to the sea port, earned profit of INR1.001bn. At the end of last fiscal, industry debts to financial institution amounted to a staggering over INR125.3bn while equity was INR114bn.

Spokesman for All Pakistan Cement Manufacturers Association (APCMA) also pointed out that most of its member companies had been incurring huge losses after substantial surge in the cost of production. The input prices, especially coal, furnace oil, diesel, electricity have witnessed significant increase from last few months which have jacked up phenomenally, cement producers’ cost of production.