Pakistan cement dispatches likely to grow

Pakistan cement dispatches likely to grow
Published: 04 January 2012

Pakistan cement manufacturers and exporters are expected to see an average growth of 3.17 per cent per annum in the 2012-2014 period with growth likely to be spurred by a number of measures.

Pakistan produced/dispatched 31.43Mt in 2010-2011 and registered negative growth of 8.13 per cent. Capacity utilisation stood at 69 per cent. However, production/dispatches are expected to reach 31.5Mt in 2012, 32.5Mt in 2013 and 33.5Mt in 2014. Growth is likely to be triggered by 1) better utilisation of Public Sector Development Program (PSDP) funds 2) MFN (Most Favoured Nation) status provided to India to yield material results 3) higher local cement prices, 4) lower international coal prices and 5) the construction of mega dams.
Cement prices are expected to rise from PKR400/bag to PKR 420/bag in 2012, but may start declining in 2013 and 2014.

Forecasts by Karachi-based brokerage house, InvestCap, indicate that the Pakistan cement industry would perform positively in view of number of steps taken by government and rising local and overseas demand. Consumption from Afghanistan and India on a positive track. Furthermore, due to the attractive price of Pakistan cement (16 per cent less than those prevailing in India), demand from both the countries is expected to improve going forward.

The report added that prices on the local front are hovering at around PKR420/bag in the north and PKR405/bag in the south, while international coal prices eased up to US$108/t.

At the same time, major local producers are implementing cost efficiency measures (including tyre and refuse derived fuel initiatives as well as waste heat recovery projects). These measures are expected to bode well for core margins in the upcoming months and years.

The report concludes that proper utilisation of the PSDP should be considered as a catalyst for the sector. Out of total PKR730bn budgeted under the PSDP head for FY12, around 60% remains unutilised to-date.

Furthermore, the complete reduction of import duty on shredded tyres (currently at 20 per cent) is expected to help bring down production costs.