Construction: Cement sales gain momentum in South zone

Indicating robust growth in construction activities in Karachi


Farhan Zaheer July 10, 2016
The cement industry is enjoying one of the best times in its history due to continuous increase in demand. PHOTO: FILE

KARACHI: Cement sales in the South zone – one of the two zones in which the Pakistan’s cement industry is divided – have shown much stronger growth compared to the North zone in the last fiscal year.

Analysts say the surge in construction activities in Karachi, which dominates the cement sales in South zone, is the major reason behind this trend.

“Karachi dominates the South zone and high cement sales in the zone indicate that the city is experiencing robust growth in construction activities,” Sherman Securities analyst Sadiq Samin commented.

Domestic cement sales in the South zone in the first 11 months of last fiscal year surged by 24% compared to previous year. This is significantly higher than the 14% increase in domestic cement sales in North zone in the same period.

Cement consumption is high in private sector because of the on-going construction activities in Bahria town and housing schemes in Karachi. Leading cement companies in South zone like Lucky Cement and Attock Cement have increased their sales in the domestic market due to the continuous decline in their cement exports, he added.

“Security matters a lot for Karachi. If the current relative stability in the city sustains, construction activities may grow further in the coming months,” said Samin.

Punjab and Khyber Pakhtunkhwa fall in the North zone while Sindh and Balochistan come in South zone. With 24.6 million tonnes, domestic cement sales in North zone were almost five times of South zone’s 5.4 million tonnes in the last fiscal year.

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Out of the four cement companies that are already investing up to $1 billion over the next three years, two – Attock and DG Khan Cement – have intended to setup their plants in Hub, Balochistan.

The cement industry is enjoying one of the best times in its history due to continuous increase in demand. This is happening at a time when the industry is able to dictate its own pricing.

According to the Pakistan Bureau of Statistics (PBS), retail cement prices during June 2016 were in the range of Rs492-556 per 50kg bag in North zone and Rs538-553 per bag in South zone with an average of Rs531 per bag across Pakistan.

The construction sector posted excellent growth of 13% year-on-year in fiscal year 2016 compared to 4% average growth seen in the last four years (fiscal year 2012 to 2015) due to economic recovery and booming real estate sector, according to the Pakistan Economic Survey 2016.

The government expects the construction related activities will gain further momentum on the back of increasing public sector development spending coupled with infrastructure and power sector development programme under China-Pakistan Economic Corridor (CPEC).

Cement sales in fiscal year ended on June 30th, 2016, recorded a growth of 9.82% as volumes stood at 38.87 million tonnes compared to 35.34 million tonnes in last year.

According to All Pakistan Cement Manufacturers Association (APCMA), the industry sold 33 million tonnes in domestic markets in 2015-16, a robust growth of 17.01% compared to sales totalling 28.2 million tonnes in last year.

Owing to a construction boom in the country, the capacity utilisation of cement plants is improving and is now close to 85%, which is the highest in a decade. Of the total installed capacity of 45 million tonnes, the industry’s surplus capacity stands around 6 million tonnes – the lowest in the last nine years.

The writer is a staff correspondent

 

Published in The Express Tribune, July 11th, 2016.

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