Cement sector buoyed for FY13

With the curtains drawing on the first quarter of FY13, the cement sectors local dispatches increased reasonably by 5.3 percent vis-à-vis similar period last year; but declining exports marred the growth figure down to just 2.8 percent for the entire sector.
Where factors like lower average capacity utilisation of 68.86 percent and contracting exports have raised some concerns for the upcoming times, continuously stumbling coal prices, stable local demand and steady retention levels have buttressed the sectors walk into FY13.
Moreover, touted as one of the best sectors during FY12, the cement industry bounced back modestly during September 2012, according to the official data released by the All Pakistan Cement Manufacturers Association (APCMA).
After a weak August, September has seen cement dispatches, in both the local and export markets, bounce up considerably relative to previous month with mills in the north contributing around 80 percent to the off-take as usual.
With the close of the monsoon and holiday season, local dispatches during September thrived by 19.8 percent YoY, giving the sector a reason to rejoice once again. Exports that have been declining for months finally rebounded during the latest month with a growth of 3.6 percent year on year.
Tensions in Afghanistan kept exports to the region strained during the quarter marked down by a fall of seven percent YoY. On the other hand, after constantly declining for months, exports to India during September 2012 propelled by more than 50 percent.
Prices of coal, a chief input cost for cement manufacturers, have remained low during the quarter ended September 30, currently under 100 dollars. Already down by around 20-25 percent YoY for 1QFY13, coal prices have gathered a lot of hopes for the cement sector that has been grumbling about lackluster local and export demand of late.
Beside, the recent 50 basis point cut in the policy rate yet again has lifted the mood of the sector that remains highly leveraged. To top it up, expectations for higher PSDP disbursement to keep the sector upbeat cannot be warded off, especially in the election year.