The Cement Industry is set to Experience Strong Growth in Exports
In July 2023, Pakistan’s cement industry is preparing for a remarkable surge in exports, with experts predicting an astonishing 159% year-on-year increase, reaching 0.4 million tonnes. This positive trend is mainly attributed to the recent decline in coal prices, which has made cement exports economically viable once again. This growth is expected to have a positive impact on both the nation’s economy and the cement sector.
However, despite the promising prospects for exports, the domestic market is expected to face challenges in July 2023. Cement sales within the country are projected to decline by 21-25% on a month-on-month basis. The factors contributing to this downturn include the onset of the monsoon season, which often hampers construction activities due to adverse weather conditions and project delays.
According to Waqas Ghani Kukaswadia, JS Global’s Cement Sector Analyst, elevated costs of raw materials, labor, and transportation have made it difficult for businesses to maintain profitability, leading to fewer new construction projects. Additionally, higher financing expenses have made it more expensive for builders to initiate new projects, resulting in a decrease in cement demand in the market.
In July 2023, the average daily domestic cement sales are expected to be around 89,000 tonnes/day, showing a decline compared to the average daily sales of 97,000 tonnes/day observed in July over the past five years. These figures underscore the slowdown in construction activities and the impact of higher costs on the industry.
Despite the challenges in the domestic market, Pakistan’s total cement sales are projected to witness a considerable boost of 53-57% year-on-year, reaching 3.2 million tonnes in July 2023. This surge in sales can be attributed to both local dispatches and cement exports.
Local dispatches are expected to rise by 44-48% year-on-year, reaching 2.8 million tonnes. This growth is influenced by a low base effect caused by last year’s flash floods and prolonged monsoons, which adversely affected the industry.
Cement exports are also set to flourish in July 2023 due to the decline in international and Afghan coal prices, making exports economically viable again. The reduction in freight costs has further contributed to the growth of cement export numbers.
While cement retail prices remained stable in July 2023, higher interest rates, expectations of a slowdown in construction activity, and controlled Public Sector Development Program (PSDP) spending pose challenges for the start of FY2024. These factors are likely to keep cement dispatches under pressure in the coming months.
To maintain profitability and ensure growth, the industry must address challenges related to elevated raw material and labor costs, transportation expenses, and high financing charges. Additionally, fostering an environment conducive to new construction projects will be crucial in driving demand for cement.
Despite the anticipated decline in domestic sales in July 2023, the cement industry of Pakistan is poised for substantial growth in exports, driven by the decline in coal prices. The industry’s ability to adapt to market dynamics and address challenges will play a pivotal role in its continued growth and contribution to Pakistan’s economic development.
For more information, Visit AH BLOG