KARACHI – Local cement sales are likely to be in the vicinity of 23 million tonnes in FY11, down by an annual two percent. In addition, a demand rebound by seven percent in FY12 is expected due to reconstruction of infrastructure damage, caused by floods.
The Asian Development Bank (ADB) has recently announced $650 million for infrastructure purposes. However, cement export sales are likely to remain flat in FY12, i.e. around nine million tonnes, said Atif Zafar at JS.
Industry’s local offtake in March 2011 posted a 24 percent monthly increase, largely inline with its five year historical average of 21 percent. “We believe that these numbers alleviate most concerns regarding lack of demand for the product due to cut in PSDP targets and crowding out of private credit offtake amid high interest rates”, he added. Higher farm income, on the back of rising agricultural commodity prices, has been the key driver of demand growth.
Furthermore, exports were down by an annual 12 percent in March – propelled by unattractive price levels in other countries. In particular, sales surged a monthly 16 percent, largely driven by a rising demand in Afghanistan (up by a monthly 23 percent). Though, significant demand is reported in India for Pakistan’s products, relationship between the two countries acts as a major hindrance.
Prices in the local market continue to surge upwards, reaching Rs 390-400 per bag in north and Rs 340-350 in south. It is believed that the latest round of increase in products’ price has largely offset the impact of higher coal prices and will result in margins accretion for cement companies.
Local cement offtake has risen by a monthly 24 percent in March, 2011, signaling that recovery has started to gain pace – aided by strong farmer income. Robust and higher than average seasonal growth is likely to ease off concerns over falling demand for cement, due to the crowding out of private credit offtake.
Exports also exhibited a healthy 16 percent monthly increase. Overall, the industry’s utilisation clocked 81 percent compared to 67 percent last month. However, local sales were down by an annual four percent, while high base of last year was taken as a key contributor in this decline.
