Cement: a promising outlook henceforth

With the dawn of the spring season, Pakistans cement industry is sure to rejoice. The latest data released by the All Pakistan Cement Manufacturers Association bears testament. According to official data, March has seen cement dispatches, in both the local and export markets bounce up considerably relative to the previous month. This effect is not unknown to the industry, in general; as depicted in the accompanying graph, the past four fiscal years have also witnessed the March effect. With the exception of exports to India, local dispatches from both the Northern and Southern regions and exports to Afghanistan have increased on a month-on-month basis. Even exports via sea, which have been declining this fiscal year relative to the previous year, showed some improvement in March vis-à-vis February. The improvement usually seen in cement dispatches this time of the year can be explained by the culmination of the winter season, during which cement sales tend to stay muted due to difficulties in transporting the product in harsh weather conditions. As for a year-on-year comparison, in March FY12, export sales to all key destinations decreased significantly relative to March FY11 by around 24 percent. For 9MFY12, the year-on-year decrease in export dispatches netted at about eight percent, with exports via sea plunging the most. FY12 has been a sluggish year in terms of export sales from Pakistan. Exports to Afghanistan and India marginally improved during FY12, year-on-year. However exports by sea fell considerably. Excess capacity in GCC countries and lower margins for local players has slowed the pace of export dispatches via sea. Even though prices in these markets have begun improving, the positive effect on export sales from Pakistan is yet to be seen. If land routes for export sales to India are open for business soon, there may be a likelihood of seeing improved sales to the neighbour. Meanwhile, Afghanistan continues to be a significant export destination, particularly for players up north. The momentum of improved domestic sales continued in March. With the winter season done away with and a revival of local construction activities, and with expectations of greater PSDP-based development expenditure in an election year, local dispatches may rise by as much as 10 percent for FY12 relative to the previous year.