Pakistan’s cement industry performance during 1HFY 2021

The cement sector continued to perform well, as its output rose sharply by 20.8 percent in H1-FY21 compared to a 2.7percent growth last year, says a report of the State Bank of Pakistan released its Second Quarterly Report on The State of Pakistan’s Economy for the fiscal year 2020-21 today.

According to the All Pakistan Cement Manufacturers Association (APCMA) data, the YoY increase in the domestic sales and exports was 15.9 and 14.6 per cent, respectively (Figure 2.7). For cement exports, this level represented a six-year high. The growth was predominantly driven by domestic demand. The increase in domestic offtake accounted for 83.5 percent of the overall development, whereas last year, its contribution stood at 46.0 percent. Almost 73 percent of all dispatches in the North were made for the local market; this represented growth in domestic sales in the region by 16.1 percent in H1-FY21 against 11.7 percent last year.

Offtake in the South also increased by 14.0 percent, in contrast to a 27.4 percent dip last year. Average cement prices, however, fell by 3.1 percent in H1-FY21 on YoY basis. This was partly attributed to a reduction in FED on several types of cement in the Budget 2020- 21 in the wake of the Covid-19 outbreak.

In addition, the fall in cement price was also linked to the decrease in the price of coal, which is an input in cement production. The international price of coal declined 11.2 percent during H1-FY21 on a YoY basis.

As a result, the domestic producers may have been forced to pass on the benefit of lower input price to the consumers. On the export front, the quantum increase in sales came solely from the South region, where the dispatches grew by 28.7 percent in H1-FY21 compared to 41.9 percent last year. Export growth in cement and clinker exports remained strong due to demand from non-traditional destinations, such as China and Sri Lanka. China’s renewed focus on infrastructure developments to revive its economy in the aftermath of Covid-19 led to an increased reliance on imported cement products.

Meanwhile, demand for cement in Sri Lanka largely emanated from an Asian Infrastructure Investment Bank (AIIB) financed development project. In contrast to the South, the producers in the North saw their exports of cement and clinker decline by 14.7 percent in H1-FY21, after a 3.8 percent contraction observed during the same period last year.

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