Cement industry celebrates export gains despite declining local demand

Local cement manufacturers are celebrating despite local cement sales falling by 10.4 percent in the first half of FY 2024-25. Seemingly strange at first glance, there is a perfectly good reason for the sentiments within the cement industry.

According to Dawn News, local cement sales have fallen from 20.228 million tons to just 18.122 million tons in the same period last year. However, a 32 percent increase in exports helped to stabilise the loss in local demand.

All Pakistan Cement Manufacturers Association (APCMA) revealed that exports sharply increased from 3.655 million tons to 4.81 million tons over the first half of FY 2024-25.

In December alone, local demand for cement shrank by five per cent, resulting in only 3.37 million tons dispatched to local purchasers. This represents a 0.17 million ton drop in local cement demand in comparison to December 2023.

The recent explosion in cement prices is the reason behind the persistently declining demand for local cement. There has been a 21 percent increase in the YOY price of cement, which has made it unbearable for small to medium-sized construction companies to purchase it.

Another contributor to the subpar local cement demand is the government itself, which is limiting expenditures on infrastructure projects. Reducing expenditures on projects is one of the many austerity measures that Pakistan is taking to ensure that it can maintain healthy fiscal surpluses and appease the International Monetary Fund (IMF).

 
Cement manufacturers are making more money in absolute terms, even though the overall dispatch figures are growing as a result of the high level of demand for cement in the international market.

In December 2024, total demand for cement rose by 2.23 percent to reach 4.154 million tons compared to 4.063 million tons in December 2023.

Pakistan primarily exports cement to Afghanistan, Sri Lanka and Madagascar. Now, with the Sri Lankan government reducing import levies, Pakistani cement manufacturers have found it easier to export to their second-largest purchaser of cement.

The reason behind larger import volumes is the reduction of import taxes by Sri Lanka, which has made Pakistani cement cheaper and more attractive there.

While cement manufacturers benefit enormously from existing circumstances, the real estate sector is expected to slow down. The subpar level of cement procurement at the local level suggests a reduction in infrastructure projects.

This could create an issue concerning housing, as individuals may find it tough to purchase cement at exorbitant rates. Experts are suggesting that the government should reduce the taxes on cement sales. Islamabad, however, may not be so keen to reduce these taxes if it really does want to adhere to the IMF-prescribed austerity measures.