KARACHI – Local cement producers must have breathed a sigh of relief after receiving a green signal from India for exports which, analysts said, were declining. Analysts stated that cement exports from Pakistan remained depressed during the month of March and had exhibited an annual dip of 14 percent. “A ray of hope has emerged for local cement producers as they are now allowed to export cement to India,” said Furqan Punjani, an analyst at Topline Research.
Cement exports to India resumed after Pakistanis exporters were awarded the Bureau of Indian Standards (BIS) certification. “Cement producers in North have started exporting cement to India,” Punjani said. However, with huge capacity additions in India and ongoing logistic issues, analysts believed that Pakistan’s annual cement exports to remain will be around 500,000-800,000 tonnes during the next financial year (FY12). While, in FY11, it could be around 80,000-100,000, they opined.
Punjani claimed that the country’s cement exports to India, which were consistently under threat from regional capacity buildup, could touch the 500,000-800,000 mark in FY12 and FY13. This, the analyst said, was evident as cement exports by Saudi Arabia to its neighbours (Pakistan’s major buyers) halted in construction activities in the United Arab Emirates and Afghan border closure on regular intervals. “Thus all these new markets would create some enthusiasm for local producers in North as ever-increasing construction activities in India would keep grey cement demand alive in the foreseeable future,” the analyst underlined.
The Indian government was expected to allocate $1.0 trillion for housing construction during the next five years, he added. “Thus, with lower local demand, we believe that producers in North would capitalise this opportunity.” Currently, Punjani said, few major producers including DGKC, LUCK, MAPLE and LPCL had started exports to India from April 11. The analyst maintained that India was currently enjoying a huge effective cement manufacturing capacity of around 261 million tones, which was expected to rise to around 290 million tonnes by the end of next year.
However, annual cement demand in India was around 210 million tonnes, thus leaving capacity utilisation to remain on the lower side, at 80 percent, compared to 97 percent in FY08, he said. “Consequently, despite major expenditure expected to be seen on construction activities by Indian government; we believe that the supply glut will prevail in Indian markets. Thus, Pakistan’s cement exports future in India remains a shaky area compared to FY07-FY08 where India was in acute shortage of cement and so imported around one million tonnes from Pakistan,” Punjani said.
