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The cement industry is in high spirits, analogous to very few industries in the country that are not only growing in the midst of the pandemic but set to make great leaps over the next few years—without any major unforeseen snags. In 10MFY21, total cement dispatches grew 19 percent year on year, with both exports and local dispatches growing at about the same pace. The industry expects to grow 10-15 percent each year for the next several years.

This projection makes sense. The current demand of 19 percent is on the back of a revival in the construction industry with projects that were facing delays have suddenly been breathed new life into. Construction work for new projects under Naya Pakistan Housing Program undertaken by Pakistan Housing Authority (PHA) or Federal Government Employees Housing Authority (FGEHA), particularly in Punjab and KP and to an extent Baluchistan has already started. More projects will come online as the government moves full steam ahead to meet its housing supply targets.

A number of hydro power projects are under construction or awaiting approval under CPEC while construction of Special Economic Zones (SEZs) under the same is also in the works. These long-term projects will yield great domestic demand, and current demand is just the start. So far, the average monthly offtake during FY21 is up 26 percent compared to FY19, 22 percent compared to FY18 and 43 percent compared to FY17 which was a great year for the cement industry. Twice, the industry has come close to selling 6 million tons in monthly offtake, after touching 5 million tons for the first time ever in Oct-19.

It is impressive that exports are keeping up with domestic demand, despite the shipping concerns at the beginning of the year as vessels and containers were hard to find and shipping docks were crowded causing delays in cement exports. That problem seems to have been resolved. The growth in seaborne exports of cement and clinker has been markedly higher than cross-border exports—23 percent as opposed to 12 percent for the latter in the cumulative year to date number. In the month of April, cement exports constituted 18 percent of total sales, higher than the 15 percent the industry has maintained over the past six months or so.

Once its biggest market, Afghanistan is no longer a budding space for Pakistani exports—given its increasing reliance on India, Iran and Central Asian countries—however, Pakistani cement manufacturers could be looking at Uzbekistan which has suddenly become more accessible to Pakistani exporters with the signing of Transport Internationaux Routier (TIR). Pakistani exports can go straight to Torkham through the Afghanistan border on road.

As a surplus producer of cement, it is important for export markets to remain open for the industry, especially as it embarks on a fourth expansion cycle in recent history. Over the next few years, the industry may touch a 100 million tons, adding 18 million tons of capacity within the next two years. It’s confidence in domestic demand is unwavering, it seems.

The government’s role here cannot be underestimated. Aside from announcing a very lucrative construction amnesty deal and multitude of benefits for builders under the Naya Pakistan Housing Program, the SBP’s temporary refinancing facility which is supporting expansion and BMR projects for businesses plus the reduction in policy rate is serving the industry’s future production plans well. The industry is on a roll.


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