Cement sales set for recovery after lock-down eases

KARACHI: Cement makers saw fast recovery in sales following an ease in the lockdown, although they continue to receive dent to volumes in Sindh where the virus uproar is yet to subside, an industry official said on Tuesday.

Irfan Amanullah, senior general manager of Attock Cement said sales dropped significantly, especially in the northern region, as the effects of lockdown by provinces were visible in industry sales.

“However, immediately after softening of the lockdown, sales of cements on a per day basis swiftly reverted to approximately 75 percent of pre-lockdown levels,” Amanullah said, addressing a webinar hosted by BMA Capital. “Sindh has stricter implementation of the lockdown due to which sales remain lacklustre.”

The government announced relief package for the construction sector, which is expected to translate into additional cement demand of two million tons over the next two years. “Cement prices are likely to remain weak on account of dull demand due to lockdown amid COVID-19 and lower activity in the upcoming month of Ramazan,” he said. “However, the same is likely to witness an upside given the recently announced construction package and progress on dam construction.”

Amanullah said two major export markets namely Bangladesh and Sri Lanka were also in a state of lockdown due to which exports suffered in the last two months. “The situation of lockdown will be important to determine the fate of cement dispatches in the near future.”

Exports of posted over 25 percent improvement during FY20TD mainly on the back of improving clinker exports. Approximately 50 percent of export volumes consisted of clinker and a bulk of these exports were made to Sri Lanka, Bangladesh, Kenya, Qatar, Tanzania and Uganda.

“Lower cement demand in the export market due to COVID-19 pandemic is exerting pressure on the retention prices and the scenario is likely to persist in the near future,” he said. “The southern region has witnessed better price discipline compared to the northern region. This improved pricing discipline has been mainly attributable to the exports to regional markets. Exports have played a pivotal role in reducing excess supply in the market historically. This is true in current scenario as well where albeit weak margins, exports continue to support domestic utilization levels in the Southern region.”

Amanullah said cement demand has the potential to post significant growth in the long-term. However, the near-term trajectory of growth is likely to be the function of ongoing macroeconomic dynamics. Pakistan’s per capita consumption of 170 kilograms is significantly less than world average of 700kgs per capita. The consumption in Pakistan lags even the regional average of 400kgs per capita.

Currently, cement capacity of the industry stands at 69 million tons, while the total demand is likely to clock in at 47 million tons for the year. The installed capacity has tripled in the last 17 years. In terms of supply, Pakistan is now the top 20 producers in the world.

“If Pakistan’s cement demand continues to grow even at a conservative rate of 5 percent per annum, the capacity utilisation level of the cement industry is projected to touch 92% level in FY26.”