Pakistan's producers turn to exports

Pakistan's producers turn to exports
10 January 2024

Pakistan's domestic sales for the cement industry during the first half of the current fiscal year (1HFY23-24) have grown by a mere one per cent compared to last year.

Ballooning construction costs, of which cement prices have contributed their part, have deterred demand. The recent implementation of the axle road regime has further sent prices hurtling forward as transport costs increase. This is unlikely to ease over the next couple of months, which will keep prices steady and looking up. Inflation has likely suspended plans for many to begin new constructions, while ongoing projects may be overrun with cost escalations. This is not to say there is no demand in the local market at all.

Though sluggish domestic construction subdued local cement sales, exports have provided the necessary cushion. They have doubled since the previous year, with cumulative 1HFY23-24 increasing sales by around 10 per cent YoY.

The growth in exports was fuelled as some companies explored and reached new markets, while others have utilised the advantages of rupee depreciation and coal cost optimisation.

Capacity utilisation stands below 60 per cent. Companies have spent substantial sums of money to expand their production capacities in anticipation of a construction boom. While that never-boom was a bust, companies now have to contend with large capacities for which there is not enough demand. This has sprung some companies into action as they become more proactive about exporting their product abroad, but others still have to catch up. For now, pricing power and coal efficiencies have kept most companies financially upright, but if demand falters more, fortunes could easily turn sour.

Published under Cement News