Pakistan’s local cement dispatches will likely go down 10% YoY and 4% MoM to clock in at around 3.19 million tons in Dec-2024. Local cement dispatches are down year over year due to (i) the higher cost of construction and (ii) muted government spending on infrastructure.
The MoM decline in sales is primarily attributed to the winter season, particularly in the northern region. However, the decline in the southern region is less pronounced. It is likely due to government-led construction activities aimed at rehabilitating flood-damaged houses and supporting infrastructure projects.
Considering the above sales figures, the sector’s average daily domestic sales are expected to be 106.5k tons/day on December 244, lower than the last five-year average of 122.4k tons/day.
Exports during Dec-24 are anticipated to increase by 52% YoY and flattish MoM at 0.8mn tons. Moreover, FCCL, DGKC and LUCK exports will likely increase by 136% YoY, 118% YoY and 73% YoY in Dec-2024.
This brings Pakistan’s total cement sales to around 3.99 million tons in December 2024, down 2% year over year and 4% Month over Month. Total cement capacity utilization on December 24 is estimated to be 59%, compared to 61% on November 24 and 60% on December 23.
In 1HFY25, total cement sales are likely to decrease by around 5% YoY, with local sales expected to decline by 11% YoY while exports up by 32% YoY.
As per the Pakistan Bureau of Statistics (PBS), the average retail price in Dec-24 decreased by PkR 8/bag MoM and PkR 22/bag MoM to PkR 1,385/bag and PkR 1,434/bag in the South and North, respectively.
Outlook: Local cement demand is expected to recover in FY25 due to improved fiscal space, easing inflationary pressures and declining interest rates.
However, given the rise in cement prices, recovery will likely be modest. We believe growth in exports 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.
We maintain our overweight stance in the cement sector, where THCCL, LUCK, FCCL, and MLCF are our top picks.
Courtesy – BMA Capital Management Ltd.
