May 01, 2024 PRINT EDITION ► BR MARKETS ► Dollar to PKR ►
☰
✕

Cement: survival or revival?

BR Research Updated 22 Oct, 2019

While bears are still ruling the roost in the south zone which saw domestic dispatches decline by 32 percent in 1QFY20, demand has definitely picked up in the north zone. This is despite the austerity drive which has compressed commercial development demand, as well as the government's recent efforts to document. One of the measures taken is to introduce a conidtion to display national identify cards for any purchase and sales of goods above Rs50,000. Evidently, a lot of cement traded in the market is done by unregistered dealers. But September's growth shows that cement companies that were throughout last year competing heavily on prices due to shrinking demand may now be getting a breather as planned government projects kick off.

The south players are relying heavily on lower value clinker to overseas markets. In fact, exports originating in the south zone are 66 percent of all exports while clinker constitutes 41 percent of all exports going cross-border and overseas.

On that note, it is important to mention, that while exports to Afghanistan have grown against all odds, the increase is only making up for the closure of the Indian market for Pakistani cement. In 1QFY20, exports to Afghanistan grew 31 percent, with a major push that came in July and continued growth in the past three months.

Ultimately though, exports are still only 18 percent of all sales. Historically, there have been times when this had gone up to above 30 percent for the industry, and upwards of 40 percent for some companies. Exports-whether cement or clinker-fetch lower prices in the international markets which shrink margins for companies. Any major revival of the industry would depend on a swift and substantial shift in domestic demand which may come as PSDP funds are released, interest rates loosen up, and the Naya Pakistan Housing Plan begins construction.

Read Comments