Pakistan’s cement under the shadow of coronavirus

Pakistan’s cement industry has been impacted directly and indirectly by the coronavirus pandemic. The spread of the virus is driving cement manufacturers to reschedule or hold board meetings through video link. Export dispatches to Afghanistan are being suspended, while producers are seeing a fall in local cement demand, with lockdown of the port cities of Karachi and Sindh province. The other three provinces are partially locked down and this is expected to affect local dispatches.

However, the industry expects to hear from the country’s federal government in terms of providing an  incentive package this week for the export and other industries, including the construction industry, which would act as catalyst in more than 40 industries, experts anticipate. The start of the large-scale Naya Pakistan Housing Plan (NPHP) in line with federal government plans will also be a stimulus. The peace process in Afghanistan would similarly be beneficial for the cement industry in the long term.

Rescheduled AGM
Power Cement Ltd (PCL) and Pakistan International Container Terminal Ltd (PICT) have rescheduled their Extraordinary General Meeting of Shareholders/Annual General Meeting to avoid public gathering in a bid to stop the spread of the coronavirus. The PCL meeting will be held on 28 March through video link. PIBTL will now hold its meeting on 6 April instead of March 25 at a terminal site througha  video conference call with a minimum number of top officials.

Export to Afghanistan
External trade with Afghanistan is suspended to avoid spread of the coronavirus in both countries, except with permission of essential foods items on 21 March through the border in Baluchistan, as a special gesture of Pakistan’s government on the directive of the prime minister. Pakistan exported 1.73Mt of cement to Afghanistan in 8MFY20 and about 200,000t in February. If trade halts altogether over the next few weeks, Pakistan’s cement industry could lose an estimated 0.8Mt of export dispatches by the end of June. The loss in exports will depend on how long the border shutdown will last.

Lockdown of Sindh province
Sindh province has been in lockdown following the order of Sindh Chief Ministe, Murad Ali Shah, starting Monday, 23 March for the next 15 days to control the spread of coronavirus. Sindh has the largest number of coronavirus cases in the country with 292 confirmed. Pakistan’s tally is currently 645 with four deaths. The other province have called forces to help civil administration in control of virus.

Incentive package
The Pakistan government is likely to announce an incentive package that is being prepared for industry to help them weather the severe disruptions in demand as well as their operations with the spread of the coronavirus. The construction sector and textile exporters are high on the list of industries that are in focus as the incentive package is to be announced later this week.

Naya Pakistan Housing Plan (NPHP)
Prime Minister Imran Khan inaugurated earlier this month PKR100bn (US$629.7m) worth of projects for the construction of 20,000 housing units under the Naya Pakistan Housing Plan (NPHP). This is exactly the good news that cement, steel and other building material manufacturers needed. However, the coronavirus will certainly hurt industrial production – whether it is because industries are shut down to protect the spread of the virus or the virus is spread and the economy is in chaos. The uncertainty is definitely setting in.

Economic benefits of Afghan peace
The continuing spread of COVID-19 has taken the global attention off, among other things, the high hopes attached with the Afghan peace process. With the US committed to withdrawing its troops by the middle of next year, it is expected that sanity will prevail among the factions and a dialogue will eventually take place, as the alternative will be default return to the civil war that had ravaged Afghanistan for so long. If the real peace is achieved in all faction in Kabul, it will lead to a new era of development in Afghanistan, local experts believe. If international players invest big in Afghan mining, agri-business, construction, water and transportation sectors, it can lead to greater demand for Pakistani manufacturing products like cement, steel, chemicals, POL products, trucks and buses.