Provisional cement data for Jun’22 depicts a rise of 2% YoY to 5.30mn tons, and domestic dispatches recorded an uptick of 9% YoY to 5.07mn tons. Meanwhile, exports shrunk by a massive 58% YoY during Jun’22 to 0.23mn tons due to a decline in North-based exports to Afghanistan by 51% YoY to 0.01mn tons coupled with the 62% YoY dip in South-based exports to 0.13mn tons. However, MoM offtake growth appears robust, displaying a 60% surge in Jun’22 over last month (May’22: 3.15mn tons) led by a solid 61% escalation in domestic dispatches amid pent-up demand since the Eid Holidays last month wiped off almost a week of working days.

Exports also showed improvement on an MoM basis, going up by 32%, with growth seen in North (+36% MoM) and South (+29% MoM) based exports.

This took the FY22 dispatches to 52.93mn tons (down by 8% YoY), given a 1% YoY cut in domestic offtake to 47.73mn tons as the government / SBP rolled back incentives offered during the initial COVID outbreak, interest rates went up, cement prices rose drastically as manufacturers passed on costs (primarily higher coal prices in the backdrop of a commodity super cycle, PKR depreciation and higher energy tariff), which together with low public sector-led demand given a tight fiscal situation, could not aid cement demand this year.

Meanwhile, exports have continued to underperform; 44% YoY decline during FY22 to 5.20mn tons attributable to a slow down in sea-based exports to Bangladesh and Sri Lanka and liquidity issues in the neighbouring Afghan market eroding exports from Pakistan. Further dissection revealed that deterioration in North during FY22 arrived at 6% YoY to 40.43mn tons with local offtake compressing by 3% YoY to 39.52mn tons amid weak demand from construction activity and government projects. Exports dwindled by a significant 64% YoY to 0.91mn tons. Whereas South-based dispatches underwent a reduction of 12% YoY owed to a 36% slow down in exports. However, domestic demand in the local South market remained shielded, growing by 9% YoY in FY22 to 8.22mn tons, as many housing projects remained on track.

Courtesy- AHL Research