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After months of staying in the Rs1200 range, in just the past two weeks, cement prices quietly jumped a few steps ahead, climbing from just under Rs1300 to an average of Rs1409 per bag. In some markets, particularly those in the north, the prevailing prices are even higher (Islamabad: Rs1458, Lahore: Rs1500, Sargodha: Rs1460, Peshawar: Rs1500). Long gone are the days when southern prices would be ahead of those in the north. The nearly Rs140 hike per cement bag—which was even higher in certain markets such as Islamabad (Rs 153), Lahore (Rs173), Sargodha (Rs167), Larkana which is catching up with other markets (Rs207), Peshawar (Rs177), Bannu (Rs170), Quetta (Rs160) among others—comes at the heels of the new Budget and the increase in FED on cement.

As opined in the column dated Jun-26, 2024, cement manufacturers have been raising prices slowly and persistently for weeks (see the graphical representation of average prices over the past year, and prices over the past 10 years). In Dec-23, the cement price hit Rs1244 which was the highest till price increases slowed down. Between then and now, the net increase in price is Rs169 per bag—which is quite a jump considering that a major portion of this comes in just the last week alone. This could set smaller projects back in time and may be a dent in the pocket for others, if the frequent but small increases in prices over the past year haven’t been before. Demand would suggest they have. In FY24, latest reported statistics suggest domestic offtake was down 5 percent. This may not seem like a lot, but this is being compared from the low base of FY23. In fact, comparing FY24 offtake to FY22’s; the decline is significant at 20 percent. Just a year before that in FY21, the industry had sold the highest cement (roughly 48 million tons) it ever had in history in-country. This is now down to 38 million tons, lowest in 7 years.

Even though capacity utilization has slipped considerably this year, cement producers have been prepared for a rainy day or two. Keeping prices ahead of their costs, keeping energy costs optimized by investing in the right technology, and keeping options open by being export-ready and having a few markets on their radar to send their cement off to. In FY24, exports grew 56 percent from FY23, and were 35 percent higher compared to FY22. Whilst exports (in tons) are not at their highest, they contributed 16 percent to the sales mix thereby providing an adequate cover for producers’ fixed costs.

Thus far, the strategy is working. For end users however, construction costs have skyrocketed as it isn’t just cement that has become expensive but all sorts of construction materials, as well as labor charges, and transportation. With lower development spending on the horizon, price pressures mounting for nearly all goods and commodities, higher energy prices and criminally higher taxes across the board, there aren’t many scenarios that can be painted for FY25 that will be too diametrically opposed to how FY24 fared. For cement manufacturers though, it wasn’t too bad then (post-tax combined earnings grew 17% in 9MFY24) and it won’t be too bad come Jun-25.


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