Cement capacity utilisation falls to lowest in a decade

Industry claims it is using 68% of capacity due to weak demand.

LAHORE: Thin demand for cement, both in domestic and export markets, has taken a heavy toll on the industry as capacity utilisation in first two months of the current fiscal year has dropped to the lowest in a decade at 68%, say cement manufacturers.

According to a spokesman for the All Pakistan Cement Manufacturers Association, the fall in demand in July and August was mainly due to less activity in Ramazan and heavy rains in the country.

Data released by the association showed that cement sales dropped 1.64% in July and 2.82% in August. The industry sold 5.096 million tons of cement in July and August this year compared to 5.209 million tons in the corresponding period last year, down 2.17%.

Local consumption fell from 3.664 million tons in July-August 2011-12 to 3.641 million tons this year, a decline of 0.61%.

The spokesman termed the declining consumption a matter of serious concern for an industry, which had invested heavily in enhancing its capacity over the last decade to cater to the expected increase in domestic demand.

In the decade from 2002-03 to 2012-13, the cement production capacity has increased from 16.321 million tons to over 44.80 million tons. The industry was of the view that domestic consumption remained almost stagnant in the past five years at 22-23 million tons. It blamed the economic recession for keeping the construction sector’s growth at very low levels.

However, exports proved a boon for the cement manufacturers as they grew from zero in 2001-02 to 10.981 million tons in 2008-09. Since then, exports declined consistently, reaching 8.568 million tons in 2011-12.

The decline continued this fiscal year as well as exports in July and August fell 5.87% to 1.455 million tons.

According to the spokesman, exports to India fell by a whopping 38% to 75,784 tons in July and August. “Exports to India have been on a constant decline ever since the two countries opened their borders for liberal trade. The decline is not due to weak cement demand but because of very stringent non-tariff barriers erected by India,” he said.

Exports to Afghanistan also fell because of economic slowdown there. Exports to Kabul decreased by almost 5% in the first two months of the current fiscal year.

Published in The Express Tribune, September 5^th, 2012.