According to data released by the All Pakistan Cement Manufacturers Association (APCMA), local cement shipments from the industry during the month of October 2022 were recorded at 3.89 million tonnes, as against 4.6 million tonnes (MT) in October 2021, reflecting a fall of 15.5 percent. Exports shipments also fell by a massive 40.73 percent as volumes declined from 611,378 tonnes in October 2021 to 362,350 tonnes in October this year. No doubt, cement is the prime ingredient utilized in the construction industry.
Experts recorded that cement consumption has a direct correlation to economic growth and improvement in the living standards of society. Historically, growth in worldwide cement trade has been lower than the rise in world trade on account of high freight costs and availability of raw materials. The sector has a huge economic impact because of its long and diverse supply chain. Cement is a hygroscopic substance with a maximum shelf life not greater than 3 months, therefore cement consumption closely matches production numbers.
In October 2022, APCMA recorded that cement mills based in the North dispatched 3.27 MT of cement, explaining a fall of 16.15 percent, against 3.9 million tonnes dispatched in October last year. Cement mills based in the South dispatched 978,166 tonnes of cement during October 2022 which was registered 25.33 percent less compared to the 1.31 MT dispatched during October 2021. Furthermore, APCMA also recorded that North-based cement mills dispatched 3.14 MT of cement in domestic markets in October 2022 explaining a fall of 17.97 percent as against 3.83 MT dispatched in October 2021. South-based mills dispatched 746,927 tonnes of cement in the local markets during October 2022 which was registered 3.22 percent less as against the dispatches of 771,755 tonnes during October 2021.
Statistics further identified that exports from North-based mills grew by 79.35 percent as the volume increased from 73,102 tonnes in October last year to 131,111 tonnes in October this year. Exports from the South-based mills declined by 57.04 percent to 231,239 tonnes in October 2022 from 538,276 tonnes during the corresponding month previous year.
The cement industry is one of the essential sectors of the global economy. This is because of its massive stand-alone output also its importance in being an essential part of the supply chain for some major industries like construction, chemicals and exploration of natural resources. Due to the high capital-intensive nature of the business, the industry tends to be oligopolistic as the market is mostly controlled by only a few firms in many countries around the world. During the first four months of the current fiscal year, total cement dispatches (domestic and exports) amounted to 13.87 MT, which is 23.1 percent lower than the figure of 18.04 MT dispatched during the same period of last year. Domestic shipments during this period were recorded at 12.49 MT as compared to 15.88 MT during the corresponding period last year explaining a reduction of 21.35 percent. Export dispatches were recorded 35.96 percent less as the volumes reduced to 1.38 MT during the first four months of the current fiscal year, as against 2.15 MT of exports during the corresponding period last year.
North-based mills dispatched 10.4 MT of cement locally during the first four months of the current fiscal year. This reflected a reduction of 21.88 percent as compared to cement dispatches of 13.31 MT during July-October 2021. Total dispatches by the North-based mills were reduced by 21.45 percent to 10.82 MT during the first four months of the current financial year from 13.77 MT during the same period last year. On the other hand, in Pakistan cement sales in the first four months of FY2022-23 are predicted to fall by 21-25 percent as against the corresponding period a year earlier.
Sales of local cement are forecast to drop by 22 percent, who attribute the fall to higher-than-expected rainfall, rising construction costs and the ongoing inflationary environment suppressing demand growth. In October cement sales are predicted to remain flat on a month-on-month (MoM) basis at 4.1-4.3Mt but contract by 17-21 percent on a year-on-year (YoY) basis.
The average daily sales in the north and south regions are coming in at around 99,000-103,000 and 23,000-24,000 tonnes, respectively. It is suggested that cement retail prices in October averaged Rs 1024/bag (US$4.63/bag) in the north region, down Rs 24/bag from the previous month.
Sources recorded that the cement sector is considered one of the more energy-intensive sectors of the economy. Energy costs account for 50-60 percent of the total production cost for cement manufacturers. Energy efficiency consequently has become a competitive factor among players. Several players in Pakistan have their own captive power plants mostly based on coal, which exposes them to volatility in international coal prices along with currency risk. Consequently, the sector remains at high risk in terms of energy sensitivity. In view of all the risk parameters discussed above, the overall industry risk for the cement sector is medium.