KARACHI: Total cement dispatches are expected to remain flat at around three million tons in September as compared to the same month a year ago, a brokerage reported on Thursday.
Topline Securities, in a research report, forecast that local sales in September would be recorded at 2.4 million tons, down two percent year-on-year (YoY) and 20 percent month-on-month (MoM), owing to monsoon effect in initial days of the month.
“We have excluded clinker sales to Fauji Cement, which is expected to come at 200-230,000 tons during the month,” Nabeel Khursheed, analyst at the brokerage said. “Including clicker, local sales of cement manufacturers are likely to post nine percent YoY growth in Sept. 2016. On monthly basis, sales were down as a result of high base effect (lower number of days in Sep 2016 due to Eid holidays.”
The report further put an expected cement export figure at around 0.5 million tons, up 11 percent YoY, but down seven percent MoM. “As per our channel checks, exports are likely to improve YoY on the back of higher dispatches to Indian market,” Khursheed said.
The analyst, citing the Pakistan Bureau of Statistics, said retail cement prices in September were in the range of Rs524-550/bag in north and Rs567-580/bag in south regions. The nationwide average price was Rs550/bag, down Rs2/bag as compared to August.
Khursheed ruled out the impact of a rise in production on the pricing. “So far, 11 cement producers have announced an expansion of around 22 million tons… (and) raised concerns of a possible excess supply in the coming year,” he added. “However, we downplay any such risk and continue our liking for the sector.”
The analyst said the capacity utilisation is likely to remain 90 percent even if sales grow nine percent a year in the next five years. Cement sales increased an average eight percent per annum between 2006/07 and 2015/16.
Cement makers are improving the utilisation of their production capacity to retain the market share in the wake of incoming new players. Market reports said Chinese companies are landing into the country through acquisition, which might also flare up price competition.
The increasing infrastructure developments related to China-Pakistan Economic Corridor (CPEC) is auguring well for the cement industry. China pledged $46 billion in investment to set up a score of energy and communication projects under the CPEC.
Media reports said the neighbouring country has already poured in $14 billion for the development. Analysts said only CPEC-related projects will create an additional cement demand of 1.5 to three million tons a year.
