Pakistan cement industry may face tough time ahead as the exports are winding down on account of falling demand amid growing capacity expansion in the region, analysts said on Thursday.
The cement industry has gone through a hard time over the past few months as after devastating floods the industry witnessed a decline in sales during the disruptions and tepid constructional activities across the country. In sharp contrast to market projections that had expected local cement demand to show signs of growth during the second quarter, local cement demand did not pick up during October and November, they said.
A combination of negative factors curbed local cement dispatches by 9.0 per cent to 8.3Mt during the first five months of FY11 compared to the same period last year. With construction activities relatively lethargic during the winters, local cement demand may remain tepid till the end of January. Poor local cement demand has come at a time when the cement makers are already nursing dull exports.
This can be gauged from the fact that cement exports during first five months squeezed by 18 per cent to 3.92Mt compared to last year. Exports are winding down on account of falling demand amid growing capacity expansion in the region.
The major stumbling block is lower Freight on Board (FOB) price, hovering at $47/t, against and average of $550/t during the same period last year. In such a scenario, only southern players will be able to stand competition as they pay far less freight charges as compared with their northern peers to transport cement to the sea ports. Export prices are low enough to slowly phase out the smaller manufacturers from the export market as even the larger ones claim to only break-even at these rates.