After recording robust demand for four months in a row, cement sales fell 14.1% in July this year compared to the same month of previous year, shows data released by the All Pakistan Cement Manufacturers Association (APCMA).
Total dispatches – domestic sales and exports – dropped to 2.23 million tons in July compared to 2.6 million tons in July 2013.
In the domestic market, cement manufacturers sold 1.73 million tons against 1.85 million tons last year, a decline of 6.52%. But the decline was more pronounced in exports, which dropped to 503,000 tons compared to 749,000 tons, down 32.9%.
Industry officials link the bad export performance mainly to decrease in shipments to Afghanistan, which plunged 58% to 183,927 tons against 441,812 tons in previous year. They believe that the trend is likely to continue in coming months as Nato forces withdraw from Afghanistan.
According to experts, the sharp drop in exports to Afghanistan indicates the declining competitiveness of the commodity in the global market where regional players like Iran are making inroads.
The duty on imported coal has added to the pressure on the cost of doing business after a massive increase in power tariffs, industry players say. Cement plants located in the south of the country, however, fared comparatively better as their overseas shipments, mainly through sea, dipped only 7.2% while exports from plants in the north dived 43.8%.
In the domestic market, the decrease in sales from the northern plants was restricted to 5.9% as opposed to a decline of 9.1% recorded by southern plants. This slowdown in construction activities in the country can be attributed partly to the monsoon season and an uncertain domestic political scenario.
In a press release, an APCMA spokesperson pointed out that the issues afflicting the cement industry had not been addressed yet by the government.
In the federal budget for 2013-14, cement was brought within the purview of the Third Schedule of Sales Tax Act 1990, which increased the overall tax burden and resulted in an increase in its prices.
The industry has approached the government on numerous occasions, pushing it to reconsider the decision and remove cement from the Third Schedule and bring it in the normal sales tax regime to help step up construction activities in the country.
“The placement of cement in the Third Schedule of Sales Tax Act is an impediment to its supply at reasonable rates,” the spokesperson commented.
“In view of the large displacement of people from terror-prone areas, there would be greater need for cement in these remote areas once the rehabilitation process gets under way.”
The budget for 2014-15 has added to the woes of the cement producers as 1% duty on imported coal has been imposed.
The spokesperson pointed out that coal was the only
fuel on which import duty had been imposed in the budget and termed it injustice to the cement industry – the main consumer of imported coal accounting for almost 95% of annual imports of 4.5 million tons.
Published in The Express Tribune, August 9th, 2014.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.