During the first nine months of fiscal year July-March FY2020, the Pakistan’s cement industry recorded a healthy growth. Cement sector performance has backed through the increased exports chiefly clinker, which went up by 100 percent during the period under review. Local/domestic demand for cement also picked up the pace as government raised the development expenditures and enhanced remittances inflow may also uplifted private construction activities. Statistics showed that the new fiscal year has kicked off on an upbeat note for the cement sector as its sales soared through a healthy 37.8 percent to 4.838 million tons in July 2020 from 3.512 million tons in the corresponding month of last year on the back of buoyancy in both export and local markets. In FY 2019-2020, the significant growth comes in the backdrop of only 1.98 percent rise in cement sales, which was totally supported through exports. In fact in last fiscal year, domestic cement consumption recorded a fall of 0.94 percent.
According to the statistics released by the All Pakistan Cement Manufacturers Association, the local offtake of cement grew by 32.67 percent to 3.953 million tons in July 2020 from 2.979 million tons in July 2019. On the other hand, exports registered a more impressive increase of 66.14 percent at 0.885 million tons from 0.533 million tons in the same month of last year. The north zone, as usual, led the total growth in sales on the strength of its domestic market, which grew by over 38.86 percent to 3.435 million tons in July 2020 as against with 2.474 million tons in July last year. However, the export trend in the north zone was highly disappointing as total exports from north-based mills amounted to only 0.123 million tons, recording a fall of 46.93 percent as against with exports of 0.231 million tons in the previous year. The fall came in the wake of a trade stand-off with India and slow construction activities in Afghanistan.
Meanwhile, the performance of south-based mills — situated near seaports — was quite the opposite. These mills could only dispatch 0.518 million tons of cement to the domestic market in July 2020, recording a nominal rise of 2.39 percent over sales of 0.506 million tons in the same month of last year. However, the south-based mills made up for the slow growth in sales in the domestic market with an exponential 152.9 percent growth in exports to 0.762 million tons, which was recorded 1.5 times the domestic sales in the southern part of Pakistan. Last year in July, cement exports from the south reached at only 0.301 million tons. It is said that the increase in cement dispatches last month gave a much-needed boost to the industry after a disappointing last fiscal year. The increasing fuel and energy prices badly impacted freight cost and the overall cost of production.
Sources recorded that the output of Pakistan’s large-scale manufacturing industries (LSMIs) declined by 10.2 percent in the last fiscal year, FY19-20, as against to FY18-19, as almost all of the major manufacturing sectors recorded negative growth. According to provisional quantum index numbers of large-scale manufacturing industries (QIM), the LSMI output fell by 7.7 percent in June 2020, as against to June 2019, and rose by 16.8 percent, when as against to May 2020.
Various economists revealed that the contribution of cement industry in the economic development can be measured through the value addition of the cement industry to Gross Domestic Product (GDP) of Pakistan, creation of employment opportunities, receipts from exports, tax payments, and the entire revenue generated through this industry. No doubt, the cement industry in the country is one of the major industries of Pakistan which have an enormous impact on the economic development of Pakistan. They have also recorded that the contribution of this industry is very effective not for only the manufacturing sector but also for the entire economic development of Pakistan. The cement industry of Pakistan was once a very small industry but it rapidly increased with the passage of time and finally it entered in the export market. This industry contributes in GDP, it creates career opportunities for thousands of people and it creates huge revenue for the government of Pakistan in the form of taxes. It also contributes both directly and indirectly in the economic development of Pakistan. It also makes contribution in the development of its allies industries mainly the transportation sector is largely benefited by it. The cement industry of Pakistan attracted not only domestic investors but also foreign investors.
The State Bank of Pakistan (SBP) has released foreign direct investment (FDI) statistics the cement and construction sectors registered a 50 percent drop in net FDI to US$118.8 million in the FY19-20, when as against with US$59.4 million in FY18-19. Of this total, the cement industry attracted an investment of US$38.7 million (-20.4 percent YoY) and the construction sector US$20.7 million (-70.5 per cent YoY), from US$48.6 million and US$70.2 million, respectively in the year-ago period. In June 2020 alone, both sectors attracted a total net FDI of only US$9.8 million. Pakistan’s government recently announced a stimulus for construction sector and expects a considerable long-term investment into Pakistan as no sources of investment would be asked until later this year. The Government of Pakistan must focus on public sector development projects and proclaim housing schemes to boost construction activities so that employment and investment in cement and allied industries can be safeguarded.