Pakistan's cement industry braces itself for challenges ahead

Pakistan's cement industry braces itself for challenges ahead
13 December 2018

Pakistan's cement industry will face challenges in the remaining six months of current financial year 2018-19 due to various pressing factors. Industry experts are of opinion that declining trends in cement demand, capacity expansion, cut in Public Sector Development Programme (PSDP), slowdown in private construction and price war may adversely impact cement industry performance from January 2019 onward. 

According to a report of Taurus Security Ltd, the cement sector in Pakistan faces a dismal outlook in FY19. Multiple expansions coming online in the near-term are expected to lead to a price war among players. In addition, the weak macro environment is anticipated to subdue total demand.

The 16 per cent PSDP cut in the amended budget will reduce the total dispatches. However, on a positive development, from FY20 cement demand is expected to normalise with the impetus from the PM’s housing scheme.
The report added that as robust years for private builders have ended, the increase in the cost of borrowing will further decrease the demand for housing finance.
Current cement capacity is around 54Mt with 20Mt in the pipeline. The new capacity is expected to come online by FY21. In FY18, the industry effective capacity was 95 per cent, the highest since FY11. On the regional front, the southern belt is expected to improve with a high possibility of exports in FY19 (+71 per cent YoY in FY18).
Due to the increased capacity, cement players could face tough pricing competition in coming years, with a major impact in the south. Experts anticipate average prices to be around PKR575/bag (US$4.11) and PKR590/bag (US$4.21) for the north and the south region respectively.

Published under Cement News