Though cement contributes between 1 and 2 percent to the total exports basket in Pakistan (in dollar terms), it is dollars we need. Closing down of borders with Afghanistan, even if temperorily was expected to hurt outgoing volumes. March did have that affect (month on month decline was 33 percent from Feb-20) but cumulatively, in 9MFY20, total volumes did not suffer, they grew. In dollar terms, the story changed.

According to data from the Pakistan Bureau of Statistics (PBS), cement exports are down 5 percent in dollar value. Tallying this with the numbers reported by All Pakistan Cement Manufacturers Association (APCMA), in 9MFY20, exports to Afghanistan grew 49 percent, sea borne exports fell 2 percent, and clinker rose 86 percent, Cumulatively, this registered a 26 percent growth. Now this number differs considerably from the PBS volumetric growth of 7 percent so there is some discrepancy here. However, one thing is clear, despite higher volume dispatches, the incoming receipts are not

The main culprit here is clinker (the intermediate product used to make cement). Nearly half the cement exports are for clinker which fetches a lower dollar value in the international markets than cement. The sudden rise in exports can be traced to China as the country cut production. Cement exporters like Vietnam have been diverting their supply toward the giant consumer moving away from smaller cement importers. This is where Pakistani cement suppliers were able to find market space.

On the other hand, cement exports via sea have declined. This is expected to further come down as lockdowns across the world continue. Construction and infrastructure development will take the back seat specially in developing economies which will have to move away from brick and mortar expenditure while tackling the health crisis. However, as lockdowns subside, governments will try to stabilize growth and welcome investment in infrastructure where employment and spillovers on economic activity is high.

Afghanistan has so far made up for the lost market chunk when exports to India all but shut down due to the countervailing duties, but this might be difficult to sustain. Trade activities have stalled as borders remain under watch despite being reopened for business.

Over the next few months, exports will decline both volumetrically and in value—partly because of COVID-19 and partly because of low-value clinker fetching a greater market and few buyers for cement.