Cement: July may set the tone

No start of the fiscal year has been this good for the cement industry as this July, at least in recent history. Marking either a promising turnaround to demand, or a pre-budgetary buying spree, in July-25, cement dispatches roared; up 30 percent from last year, 15 prcent compared to June and roughly 11 percent higher than the average monthly sales throughout FY25.

While exports were a huge contributor of this growth, domestic dispatches reared their head too; up 18 percent. This was despite the poor weather conditions in many areas of the country that must have posed challenges to cement buying.

But exports did their part perfectly. They have been performing tremendouly for cement manufacturers—in FY25, they contributed 20 percent to the sales mix when domestic offtake declined 3 percent,. This share has been climbing slowly since domestic demand slowed down, up at its current levels from 16 percent in FY24 and 10 percent before that.

In July-25, exports have not shown any signs of backing down, up 84 percent from last year, and 17 percent compared to June-25, bringing its contribution to 25 percent. Against last year’s average monthly exports, July’s sales would stand at 40 percent higher.

The real problem for cement makers—and where most of their earnings also come from—is domestic offtake that has been weakened by the reduced demand in the construction industry and less favorable macoreconomic environment.

Often the first causalty in bringing fiscal stability is cutting back on PSDP spending. As a share of GDP, PSDP spending fell from 2.43 percent in FY22 to 1.92 in FY24 vs debt servicing that has been climbing. Pullback from development expenditure often results in delayed projects that have already been facing cost overruns as time and inflation catches up to project pace.

In FY26, the federal government budgeted Rs1 trillion for core infrastructure projects which if utilized will boost construction demand during the year. In addition to that, tax measures to boost real estate activity will help in demand recovery more.

July may set the tone as domestic sales are 18 percent higher from last year, and about 4 percent higher from the average monthly sales through FY25. With interest rates down, and inflationary pressures easing to a degree—though gas and electricity prices remain troublesome—cement demand could resurface with more competitive prices for consumers as well.

Retention prices have ballooned in recent history;in just last year, cement prices in the north and south zone surged 6 percent and 21 percent respectively, and more than doubled since FY21. This has led to stable earnings for cement companies even at times when capacity utilization had slid to its record low levels.Expectations are that domestic prices will remain steady which will bring domestic demand to solid ground; specially as global coal price outlook signal stability or even a downward drag.

Copyright Business Recorder, 2025