Global slowdown, higher construction costs weaken cement sales

LAHORE: Cement sales declined by more than 20 percent to record at 21.764 million tonnes in the first half of the current fiscal on the back of higher construction cost and global economic slowdown.

All Pakistan Cement Manufacturers Association (APCMA) data released on Wednesday showed that total cement shipments, both domestic and exports, were down 20.73 percent year-on-year to stand at 21.764 million tonnes in July-December FY23. In the first half of FY22, the shipments were recorded at 27.456 million tonnes.

Domestic sales declined 16.77 percent in the first half to stand at 20.030 million tonnes against 24.065 million tonnes during the same period last fiscal. Topline Securities in its December forecast attributed the decline to rising construction cost and inflationary impact restricting the demand growth.

On the other hand, exports dropped 48.86 percent to 1.734 million tonnes compared to 3.391 million tonnes during July-December FY22. In December 2022, cement shipments went down 15.55 percent to 3.881 million tonnes against 4.595 million tonnes in December 2021. This decline was likely due to seasonal factor, where the onset of winter slows down construction activities, Topline Securities report said.

Domestic sales in the month under review were 3.676 million tonnes compared to 4.057 million tonnes in December 2021, down 9.41 percent. Exports also declined by a massive 61.88 percent as the volumes reduced from 538,002 tonnes in December 2021 to 205,061 tonnes in December 2022. Factories up north sold 3.010 million tonnes in December 2022, showing a decline of 11.60 percent, from 3.405 million tonnes in the same month in 2021. South-based mills shipped 870,355 tonnes cement during the same month, down 26.86 percent compared to 1.190 million tonnes during December 2021.

Domestic sales of the north-based factories clocked in at 2.956 million tonnes in December, down 12.48 percent year-on-year from 3.377 million tonnes. Factories down south sold 719,721 tonnes, up 5.86 percent YoY, from 679,868 tonnes.

Exports of factories up north went up 95.18 percent to 54,427 tonnes in December 2022 from 27,885 tonnes in December 2021. Factories down south exported 150,634 tonnes, down 70.47 percent YoY from 510,117 tonnes.

North-based factories despatched 16.522 million tonnes cement domestically during the first half of FY23, down 18.06 percent than cement despatches of 20.163 million tonnes during July-December 2021.

Exports from north-based units increased 6.29 percent to 578,074 tonnes during 1HFY23 compared with 543,888 tonnes during the same period last year. Total despatches by north-based units declined 17.42 percent to 17.100 million tonnes during 1HFY23 from 20.707 million tonnes during the same period last fiscal. Domestic despatches by south-based factories were 3.508 million tonnes in 1HFY23, down 10.10 percent YoY from 3.902 million tonnes. Exports from the south declined 59.39 percent to 1.156 million tonnes compared with 2.847 million tonnes.

Total despatches by south-based units went down 30.90 percent YoY to 4.664 million tonnes during the first half, from 6.749 million tonnes.

APCMA spokesman said the current economic turmoil has impacted cement consumption negatively. He said inflation has played havoc with the pockets of the consumers. “New construction projects including housing, are few in number, while the routine maintenance of residences has been postponed for better times.”

On the export front, he said Pakistan’s cement sector had taken a hit because of the Russia-Ukraine war too. Analysts expect some recovery in 2HFY23, as flood rehabilitation programmes would gain pace with the approach of the general elections. Declining coal prices could also provide support to the sector margins going ahead.