Solid growth forecast for Pakistan cement sector

Solid growth forecast for Pakistan cement sector
14 March 2008

Cement sales are expected to rise in the remaining months of fiscal year 2008 (FY08) with rising exports and stable local dispatches, a research report said. Industry sources said that the cement industry is set to increase its sales due to high production and high export orders.

With the advent of the peak local cement demand season in the country and soaring regional prices, demand for Pakistani cement is set to rise further. “Hence, it is likely that in remaining months of FY08, we might see record cement sales on both local as well as export front. Already, in the first eight months (Jul-Feb) of FY08, sales have demonstrated a healthy increase in demand of 23 per cent with dispatches of 18.7Mt,” said JS Research.

Considering the sales increase of 23 per cent in the eight months of the current fiscal year, the total dispatches are likely to reach 29.6Mt in FY08. Total dispatches declined in December 2007, but this decline has been due to lesser working days and winter season.

The peak demand season starts in March with the end of winter and advent of suitable weather for construction work. During this season sales can grow by 22 per cent versus 24.2Mt cement sales in FY07.

Some of the infrastructure development projects including building of 250,000 houses in five years, new canals, highways, buildings and new dams (like Diamir-Basha Dam), announced in the budget FY08 have already been undertaken which would help rising local cement demand.

The President of Karachi Cement Dealers Action Committee (KCDAC), Walibhai Patel said, “Local demand of cement is rising not because of higher local utilisation but due to high exports, and hence less availability of cement is pushing local demand and prices up.”

Cement exports are expected to soar by a massive 107 per cent due to the primary source of overall cement growth in FY08, the high exports owing to the cement supply shortage in India and Middle East which lead to rocketing cement prices in the region.

Pakistani cement companies, due to their excess capacity, are exporting to Middle East, Africa, Afghanistan and India where they are getting a price premium. In the first 8-months of FY08, exports increased by 140 per cent to 4.3Mt while at the end of the year FY08 the expected total exports would be around 6.6Mt.

Some Pakistani cement companies have also received orders from Russia where price of cement has reached US$280/ton (Rs860/bag), however, due to logistic problems it seems difficult to export cement to Russia.

In FY08 to-date, Pakistan cement industry brought in 5.84Mt of new capacity of cement production taking the total cement capacity to 36.1Mt. This includes DG Khan’s new Khairpur plant & Maple Leaf’s new production line of 2.1Mt each and some other additions of 1.8Mt.

Going forward, Lucky Cement with its 2 new lines of 1.26Mt capacity each and Fauji Cement with its 2.1 million tons new line are expected to come online. With these additions and other expansions, the total industry installed capacity is expected to reach 49.1Mta by FY10.
Published under Cement News