BMA Research has released tentative cement dispatch data for August 2024. Experts believe local cement dispatches will decline by 32 per cent annually. The All Pakistan Manufacturers Association (APCMA) has yet to release data, and whether it aligns remains to be seen.
According to the research report, Pakistan’s local cement dispatches will likely go down 32 per cent YoY and up 5 per cent MoM to clock in at around 2.58Mt in Aug-2024. Local cement dispatches on a YoY basis are down due to (i) the higher cost of construction, (ii) muted government spending on infrastructure due to fiscal constraints, and (iii) the implementation of axle load.
Furthermore, the MoM increase in sales is primarily due to the low base in July 2024. It’s important to note that the industry reported local cement dispatches of 2.46Mt during this period, influenced by budgetary measures taken by the government affecting the cement industry.
Considering the above sales figures, the sector’s average daily domestic sales are expected to be 86.0k tons/day on August 24, lower than the last five-year average August sales of 106.6k tons/day.
Exports during August 2024 are anticipated to decline by 22 per cent year over year while rising 5 per cent Month over Month to 0.57Mt.
This brings Pakistan’s total cement sales to around 3.15Mt in August 2024, down 30 per cent year over year but up 5 per cent Month over Month.
Total cement capacity utilisation on August 24 is estimated to be 46 per cent, compared to 44 per cent on July 24 and 66 per cent on August 23.
In 2MFY25, total cement sales are likely to decrease by around 21% YoY, with local sales expected to decline by 23% YoY and exports down by 5 per cent YoY.
According to the Pakistan Bureau of Statistics (PBS), the average retail price in August-24 increased by PkR 13/bag MoM and PkR 17/bag MoM to PkR 1,382/bag and PkR 1,501/bag in the South and North, respectively.
Outlook:
Despite the current challenges, the cement market has a potential recovery in FY25. This optimism is fueled by a higher amount allocated for PSDP, easing inflationary pressures and declining interest rates. However, the recovery is expected to be modest, given the rise in cement prices to offset the impact of the increase in FED by PkR 100/bag.
Additionally, during the month, Punjab-based players increased cement prices by PkR 70-75 per bag in response to the requirement of providing bank guarantees. To recall, Punjab-based players had previously secured a stay order from the court regarding the 6% royalty on ex-factory prices.
We believe the potential for export growth will support total cement dispatches. We expect coal prices to hover around USD 100/ton, citing reduced global demand for the commodity due to environmental concerns.
