Pakistan’s cement industry is ending FY26 on a firmer footing. Total dispatches are estimated to reach just over 50 million tons for the year, growing 7 percent from FY25 and marking the second consecutive year of recovery after a prolonged downturn. This is driven almost entirely by domestic demand, with local dispatches up 9 percent, even as exports contract by 3 percent.
The broader picture is that Pakistan’s construction cycle has been slowly stabilizing with easing inflation, reduced interest rates and better business confidence that revived private construction activity. This allowed domestic cement demand to recover from the depressed levels witnessed between FY22 and FY25.
At the same time, total dispatches remain well below the levels producers had envisioned when they embarked on an aggressive expansion drive several years ago.
Installed capacity has continued to grow while consumption has struggled to keep pace, leaving the industry with one of the largest excess-capacity overhangs in its history.
Capacity utilization is expected to improve to around 59 percent this year from 56 percent last year, but still below reasonable thresholds of 65 percent. This imbalance has been years in the making.
During the construction boom that accompanied the CPEC investment cycle and the FY21 housing incentives under Naya Pakistan Housing Program, cement manufacturers raced to expand production lines in anticipation of sustained growth in infrastructure and residential demand. Instead, macroeconomic instability, political uncertainty and repeated stabilization programmes sharply slowed construction activity before the new capacity could be absorbed.
For several years exports were helping cushion the blow. Overseas shipments took their contribution up by easing some of weakness in domestic demand but that cushion is thinner.
Export dispatches are expected to decline this year as regional competition intensifies and freight economics become less favorable, particularly for southern manufacturers shipping through sea routes.
June data suggests that sea-based exports from the south remain considerably weaker than a year ago despite an overall monthly increase in export dispatches.
The shift back toward domestic sales is commercially better for producers. Local markets generally offer stronger pricing power and significantly lower logistics costs than exports. But it also leaves the industry’s fortunes increasingly tied to Pakistan’s own construction sector, where demand remains heavily dependent on government development spending and housing activity.
In the budget 2027, the government has announced a series of tax measures aimed at stimulating the construction and real estate sectors, while a subsidized housing finance scheme is expected to support home ownership.
Lower financing costs should gradually encourage private developers to restart projects that had become financially unviable during the high-interest-rate period.
Whether these initiatives are sufficient to trigger another construction boom remains uncertain.
Housing affordability continues to deteriorate as household incomes struggle to keep pace with rising living costs and taxation. Public sector development spending also remains constrained by fiscal consolidation requirements, limiting the government’s ability to generate the kind of infrastructure-led demand that historically lifted cement consumption.
The pace of domestic demand growth is unlikely to be strong enough to absorb Pakistan’s substantial surplus production capacity anytime soon. Without a sustained increase in large-scale infrastructure investment, a meaningful housing boom or a revival in export competitiveness, utilization rates are expected to improve only incrementally over the next few years.
But for producers, that may not be a bad outcome. The country’s larger cement manufacturers have spent the past several years strengthening balance sheets, reducing costs and diversifying export markets where possible.
Perhaps they no longer require another FY21-style demand surge to remain profitable. What they do need is a stable domestic economy that steadily adds a few million tons of annual demand rather than another short-lived construction frenzy. That may ultimately prove to be a healthier foundation for the industryven if it means much of Pakistan’s cement capacity continues to cast a long shadow over the market.
Copyright Business Recorder, 2026
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