Pakistan cement sales may fall 64% in July 2022

KARACHI: The sales of cement in Pakistan is likely to fall by up to 64 per cent in the month of July 2022 on month on month (MoM) basis, analysts said on Friday.

The analysts at Topline Securities said that Pakistan cement sales are expected to decline by 60-64 per cent MoM to 2.01 million tons with local dispatches likely to fall by 61-65 per cent MoM to 1.83 million tons mainly due to (i) monsoon season across the country, and (ii) higher base effect in June 22 owing to Eid holidays in May 2022.

On year on year (YoY) basis, cement sales in July 2022 are anticipated to decline by 46-50 per cent YoY. Local dispatches are likely to down by 45-49 per cent YoY primarily due to (i) slowdown in construction activity, and (ii) higher construction cost.

Exports during July 2022 are likely to witness a downtick of 57-61 per cent YoY and 33-37 per cent MoM. The attrition in exports are on the back of global economic slowdown, disruption in global supply chain and higher sea freight charges.

Industry utilization during July 2022 is estimated to clock in at 34-36 per cent vs. 67 per cent in the same period last year.

The start of FY23 looks bleak despite summer season where usually the cement dispatches are higher as compared to the winter season. This shows a clear reflection of economic downturn where cost of all the construction materials are on a higher side thus eroding demand.

Cement prices are hovering around Rs1,050/bag up 20 per cent from Rs875/bag in May due to, (i) higher coal prices (including Afghan Coal), (ii) rupee devaluation against US dollar, and (iii) higher fuel prices.

To highlight, Afghan coal prices (factory cost) increases by 33 per cent to Rs66kton as Afghan government raised ex-mine price and export taxes which were procured by the north cement industry players.

With rising interest rates, expected slowdown in economic growth and contained PSDP, we expect cement dispatches to remain under pressure in FY23.