Pakistan: local cement sale, export decline

Pakistan: local cement sale, export decline
Published: 05 July 2011

The sale of Pakistani cement in national and international markets fell to 31.38Mt in the recently-ended fiscal year 2010/11, down by 8% from 34.2Mt in the previous fiscal year, said All Pakistan Cement Manufacturers Association (APCMA) on Monday.

Total dispatches of 31.38Mt of cement in the fiscal year 2010/11 included 21.97Mt of local sales and 9.41Mt in exports. Domestic sales declined by 6.68% from 23.55Mt sold in the previous year. Exports fell by 1.76% from 10.65Mt last year.

A spokesman for APCMA said that FY2010/11 proved to be a nightmare for the cement sector as 80% of the cement manufacturers suffered huge losses on the back of stagnant local consumption, as the government failed to honour its commitment to pay the inland freight subsidy that could have boosted exports.

“Decline in cement dispatches should alarm the planners of the country,” he said, adding that the capacity utilisation of the industry remained low at 76.12%. “Low consumption of cement reflects low growth in GDP.”

He said that continuous losses might jeopardise the servicing of PKR132bn (US$1.5bn) in loans the industry owes to the banking sector. “The cement industry has been incurring massive losses due to high cost of production, declining exports and slack local demand of the commodity.”

The performance of cement manufacturers in the southern region was better than those in the north due to proximity of the southern plants to seaports that enabled them to export easily. Export is not feasible for the large number of mills in the north due to the high transportation cost. Another point worth noting is that the domestic uptake of cement increased in the southern area of Sindh. Law and order issues in the north may also have impacted adversely sales of cement in this region, he said.

He added that two years back the government agreed to share transportation cost from mills to sea port. This boosted exports and provided some relief to the industry, but it is regrettable that the promised support was never provided, he lamented.

Even in the recently-announced budget, there was no word about releasing the inland freight subsidy totalling PKR270m to the cement makers, he stated.

However, he appreciated the government for reducing the federal excise duty on cement by PKR200/t and bringing down the general sales tax from 17% to 16%, which has reduced the concerns of cement industry to some extent.

It is also heartening to note that the government had provided a roadmap to exempt this item from excise duty over the next two years, he said and added it would spur activity in the construction sector.