Cement: despite rains, a sunny outlook

With a significant portion of the country maroo-ned by severe floods; it will not be surprising if cement dispatches turn dismal during the first quarter of the current fiscal year.
As stormy rains tail off the pace of construction activities across the country, monsoon has never been warmly welcomed by construction material manufacturers. And with a major water catastrophe in this season, cement demand is likely to scale down to a large extent than previous downpour periods.
Ostensibly, cement manufacturers have so far managed to escape floods, though water remains in the outskirts of many plants located in the northern part of the country.
But supply disruption, on the heels of damaged roads and rail links in many parts of the country, has been grinding cement production and demand to a halt. Consequently, this is also casting a pall over cement exports, primarily to Afghanistan that alone consumes around one third of the cement exports from Pakistan.
However, in the current flood episode, fortunately, manufacturers in the countrys south, that hold around 20 percent of total capacity, have remained safe.
Weak sales will definitely scarf down industrys earning during the first few months of the current fiscal year, but it is not half bad in the long-term as reconstruction of damaged infrastructure will likely fuel the robust demand for cement during the later half of the current fiscal year and the years ahead.
When that happens, northern manufacturers would be the one who will be coining money from the post-flood cement demand, due to their proximity to the submerged area.
In keeping with the local need for cement, it is quite likely that the government will shelve and postpone the inland freight subsidy incentive on exports, to pacify prices in the local market. Besides, the government is already fiscally challenged to be able to give such subsidies.
On the flipside, officials in the cement industry are of the opinion that with around a massive 40 million tons of cement production capacity, even if local demand picks up rapidly, the industry will have enough room to maintain current export levels without disrupting local supply. And if by a random stroke of luck, the government grants them an inland subsidy, then it will be the icing on the cake.