Pakistan’s local cement dispatches are likely to be down 20% year over year and up 3% Month over month, clocking in at around 2.83 million tons in September 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 slightly improved construction activity following the end of the rainy season.
Considering the above sales figures, the average daily domestic sales for the sector is expected to clock in at 94.3k tons/day in Sep-24, which is lower than the last five-year average September sales of 123.3k tons/day.
Exports during Sep-24 are anticipated to increase by 52% YoY and 42% MoM to stand at 0.87mn tons. Moreover, LUCK’s exports will likely increase by 106% YoY and 8% MoM in Sep-2024.
This brings Pakistan’s total cement sales to around 3.70mn tons in September 2024, down 10% year over year but up 10% Month over Month.
Total cement capacity utilization in September 24 is estimated to be 54%, compared to 49% in August 24 and 61% in September 23.
In 1QFY25, total cement sales are likely to decrease by around 15% YoY, with local sales expected to decline by 21% YoY while exports up by 16% YoY.
As per the Pakistan Bureau of Statistics (PBS), the average retail price in September 24 increased by PkR 12/bag MoM and PkR 10/bag MoM to PkR 1,396/bag and PkR 1,517/bag in the South and North, respectively.
Outlook: Local cement demand is expected to recover in FY25 owing to improved fiscal space, easing inflationary pressures and declining interest rates.
However, recovery is likely to be modest, given the rise in cement prices to offset the impact of the increase in FED by PkR 100/bag. Additionally, Punjab-based players increased cement prices by PkR 70-75 per bag in response to the requirement of providing bank guarantees in August. To recall, Punjab-based players had previously secured a stay order from the court regarding the 6% royalty on ex-factory prices. 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 on the cement sector, with THCCL, LUCK, FCCL, and MLCF as our top picks.
Courtesy – BMA Research
