Cement industry: Sector likely to post highest-ever sales

Companies enjoying low international coal prices and rising demand

Farhan Zaheer February 05, 2015
Cement industry’s domestic sales have surprised everyone and the growth has surpassed all market estimates. PHOTO: FILE

KARACHI: With over 6% growth in sales in the first seven months of the current fiscal year, analysts say the cement industry is set to post highest-ever growth rate in the last five years.

This growth is more important for the cement industry officials as it is mainly based on local sales unlike the pre-2010 period when the industry used to equally rely on exports.

“Cement industry’s domestic sales have surprised everyone and the growth has surpassed all market estimates. Industry is likely to grow over 6% as it has risen in the first seven months (Jul-Jan 2014-15),” industry analyst Saad Hashmi commented.

Average growth in cement production was just 2.9% in the last three years. However, cement sales have shown an exceptional 6.2% growth in the first seven months in fiscal year 2015. Even if the industry succeeds in maintaining the current growth at the end of the fiscal year, it will be the highest expansion rate in the last five years.

Cement production posted the highest-ever number of 34.28 million tons in the last fiscal year 2013-14. Dispatches increased to 20.02 million tons during the first seven months of 2014-15 compared to 18.86 million tons in the same period of previous fiscal year. This means the industry can touch 36.6 million tons by the end of June 2015 if it grows at the current pace of 6.2%.

In all likelihood, Hashmi said the cement industry will succeed in maintaining 6% growth because the remaining five months (February to June) are all those in which the construction activity remains high.

Owing to the continuous decline in cement exports over the last five years, the industry is increasingly dependent on local sales. The impact of the rise in domestic consumption is so strong that while issuing the latest data, the spokesperson for the All Pakistan Cement Manufacturers Association recently claimed, “higher cement uptake depicts a turnaround in the economy.”

Commenting on the ‘immense satisfaction’ of the industry from rising domestic demand, he said cement companies have been reaping the benefits of record low international coal prices that have significantly reduced the cost of production.

Construction sector

Association of Builders and Developers Pakistan (ABAD) former senior vice chairman Saleem Kassim Patel told The Express Tribune that the private sector is showing a strong growth, which is one of the main causes of high cement consumption in the country.

“There is a huge backlog of houses, which is why this sector will continue to attract investments. What is more important is that the current rise in construction activities can turn around the economy if the government starts supporting it,” said Patel.

However, one of the biggest hurdles to the fast growth of the construction sector is the moratorium on new gas connections for high-rise buildings. Without gas, thousands of already constructed residential buildings are still unoccupied, causing financial losses of millions of rupees to the builders and their clients, he added.

Owing to the growing shortage of gas, the PPP-led previous government banned all new gas connections to CNG stations, high-rise buildings and industries in 2011. Since then, builders and developers say the ban has been proving damaging for new investments in this sector.

Published in The Express Tribune, February 6th, 2015.

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