International studies identified that cement is a binder, a substance utilized for construction that sets, hardens, and adheres to other materials to bind them together. Cement is seldom used on its own, but rather to bind sand and gravel (aggregate) together. Cement mixed with fine aggregate produces mortar for masonry, or with sand and gravel, produces concrete. Cement is the most broadly used material in existence and is only behind water as the planet’s most-consumed resource.
Studies also showed that the global cement clinker and cement market size was estimated at USD 822.90 million in 2021 and is projected to reach USD 1458.33 million by 2028, showing a CAGR of 8.52 percent during the forecast period. No doubt, the industry has a large impact on the global economy due to its long and diverse supply chain comprising mining of the raw materials and the use of cement in the concrete industry.
In Pakistan, the government recorded that manufacturing with a share of 12.4 percent in GDP in the country has a dominant presence within the industrial sector. Pakistan’s national accounts capture manufacturing sector in three dissimilar components: Large Scale Manufacturing (LSM), Small Scale Manufacturing (SSM) and Slaughtering. Establishments having 10 or more employees are covered under LSM. During FY2022, LSM with 9.2 percent of GDP dominates the overall manufacturing sector, accounting for 74.3 percent of the sectoral share followed by Small Scale Manufacturing, which accounts for 2.0 percent of total GDP and 15.9 percent sectoral share.
According to the Government of Pakistan, since the beginning of FY2022, the cement industry in the country remained under pressure in manufacturing sector. This was chiefly attributed to a revival in construction activities in the second half of 2020 as Covid-19 lockdowns were eased. Since then, the demand for cement was said to be ‘sluggish’ because of inflation and high commodity prices. It also pinned its marked decline in exports on political and economic instability in Afghanistan.
Statistics identified that this industry showed a fall of 6.3 percent in March FY2022 on year on year (YoY) basis because of massive fall in exports. Total cement dispatches stood at 5.04 million tonnes (mt) as against 5.38 mt previous year. Domestic consumption increased by 4.02 percent and stood 4.75 mt as compared to 4.56 mt in March FY2021. The largest hit was observed through exports which drastically decline by 63.8 percent to 0.30 mt dispatches in March FY2022 as compared to 0.82 mt during the corresponding period previous year. This was mainly attributed to rising international freight rates, political and economic instability in Afghanistan and a trade ban with India.
Presently, as per the All Pakistan Cement Manufacturers Association (APCMA), during FY21-22 (July 2021-June 2022) total cement dispatches were registered 52.89 mt, 7.9 percent lower than 57.43 mt dispatched during the last fiscal year FY2021. Domestic consumption during this period was declined by 1.0 percent to 47.63 mt from 48.11 mt, while exports fell by 43.6 percent to 5.25 mt from 9.31 mt from FY2021.
Industry experts recorded that local growth was flat this year because of inconsistent strategies and the domestic political conduction. At the same time, exports fell because of the lack of availability of coal since prices rose dramatically. Furthermore, budget constraints (the government levy of 10 per cent 1-time surcharge in budget FY22-23) suggest growth next year will be pessimistic or single digit. In addition, a continuous rise in local fuel prices will also cause cement prices to go up. As a consequence, various projects have been put on hold amid high steel and cement prices. The APCMA attributes the performance to government strategy uncertainty and historically high prices for fuel, electricity, coal and other raw materials. Because of the high production cost, cement prices will continue to rise in the local market. It is also said that the government of Pakistan to devise a policy to help the cement industry export from Pakistan.
According to the Government experts It is also recorded that in the Northern Region, the domestic consumption in the north registered at 3.85 mt in March FY2022 as against to 3.81 mt dispatches in the corresponding month previous year thus explaining a slight growth of 1.07 percent. Exports from north plummeted by 71.3 percent and reached at 0.08 mt during the period as compared to 0.28 mt same period previous year. Whereas the present statistics also identified that the breakdown of dispatches shows northern-based mills dispatched 39.44 mt of cement domestically during the FY21-22, down 2.8 percent from 40.58 mt in FY20-21. Exports from the north declined by 64.5 percent from FY21-22, compared with 2.56 mt exported during the previous fiscal year.
In the Southern Region, furthermore, the domestic consumption in the south grew by 18.9 percent and stood to 0.90 mt in March FY2022 as against to 0.75 mt in March FY2021. While exports from the region declined by 59.8 percent, from 0.53 mt to 0.21 mt in March FY2022. Domestic dispatches by southern-based mills from FY21-22 were recorded 8.19 mt, showing an increase of 8.7 percent over 7.53 mt of cement during the last fiscal year. However, there was a substantial decline of around 35.6 percent in exports from the southern zone as the volumes fell to 4.34 mt from FY21-22 from 6.74 mt during the fiscal year.
No doubt, this industry facing number of challenges. One major challenge is the impact of the Covid-19 pandemic, which led to a decline in demand for cement and all other business lines like ready-mixed concrete (RMX), aggregates and asphalt. Another challenge is the reduction of CO2 emissions, because the cement industry contributes 6 to 8 percent of global carbon emissions.