Cement numbers released by the All-Pakistan Cement Manufacturers Association (APCMA) showed a continuation of the declining trend in export dispatches on a year-on-year basis, while local dispatches continued to show an increase on a year-on-year comparison. During July-April FY12, total cement dispatches were up slightly over 3 percent at 26.6 million tons, lead mainly by an increase in local dispatches, which increased from 18 million tons in 10MFY11 to 19.6 million tons during the same period of this year. Industry experts claim that the improvement in local dispatches during FY12 relative to FY11 comes at the heels of better retention prices at home, which render it more feasible in terms of margins to sell the product at home rather than in export markets, where the margins are relatively low. At the same time, one must remember that FY11 had also been a particularly tough year for the cement industry, since the Great Floods of 2010 had taken a hit on local dispatches for the worse. Exports, on the other hand, continued to show a year-on-year decline, with exports from the South depicting a steeper decline-15 percent year-on-year-than exports from the north-6 percent year-on-year. Much of the decline in exports from the South is attributed to lower exports via sea, which can be explained by excess capacities in the GCC countries, which discourage exports via sea to these areas. As for exports from the North, FY12 has so far seen an improvement of about 15 percent on a year-on-year comparison in dispatches to India, while those to Afghanistan have declined only slightly by a mere 0.15 percent on a year-on-year basis. A month-on-month analogy, on the other hand, shows export dispatches improving by about 23 percent in April FY12, indicative of an improvement in cement sales to export markets due to warmer weather conditions, which facilitate transport and supply of the product. Besides, construction activities are also believed to pick up in surrounding export markets due to better weather conditions. As for local dispatches, April saw a 12 percent decrease vis-à-vis March this year, explained by the high-base effect of March. Traditionally, local cement dispatches are highest during March in a fiscal year, with April sales witnessing a slight month-on-month dip. Going forward, there are expectations that local dispatches will stay up relative to the previous fiscal year owing to the current year being an election year, which will likely spur greater PSDP expenditures by the government. As for exports, expectations of opening up of exports via the land route to India, and of improved dispatches to Afghanistan do offer some promise, though the extent to which this may materialise remains to be seen. On a side note, there are talks going around regarding the phasing out of FED on cement, which was reduced from Rs.700 per ton to Rs.500 per ton in the previous budget. The remainder is anticipated to be phased out in two years, meaning that the FY13 budget will likely see a further Rs.250 per ton decrease in FED on cement. The previous reduction in FED had been absorbed largely by manufacturers, further adding room to their margins. The decrease anticipated this year may be partially passed on to consumers, though the added room will also likely boost manufacturers profitability.
=================================================== Cement dispatches FY12 - Pakistan =================================================== (mn tons) July-Apr YoY April MoM =================================================== Local 19.6 9% 2.2 12% North 15.9 8% 1.8 11% South 3.7 12% 0.4 17% Exports 7 -9% 0.8 23% Afghanistan 3.8 0% 0.4 36% India 0.5 15% 0.05 52% Other, clinker (sea) 2.7 17% 0.3 4% TOTAL 26.6 3% 3 -5% ===================================================
Source: APCMA
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