LAHORE - The declining trend of cement exports continues to worry the manufacturers as the cement export to Afghanistan has plummeted by 10 per cent annually owing to availability of cheaper Iranian cement there. The industry said that energy crisis and constant hike in petroleum products have made its product uncompetitive even in neighbouring country, the main purchaser of cement from Pakistan.
Industry sources said that historically US sanctions on Iran have been an impediment for Iranian exports to penetrate in Afghanistan. This has allowed Pakistan to benefit with exports to the country growing at 4 year CAGR of 14 per cent. Afghanistan is still the steadiest market for the Pakistani cement industry but recent competition from Iran has somewhat capped the market share only due to ever-rising prices of fuel and electricity in Pakistan. Going forward, the recent pledge of $16 billion at an international donor conference as civilian aid for economic development of Afghanistan is likely to bolster construction activity in the country, experts hoped. Consequently, demand for Pakistani cement should remain reasonably steady in the long run.
The overall cement exports plunged by 9.2 per cent YoY to 0.76 million tons while on a monthly basis, the same improved marginally by 3.3 per cent. This monthly improvement is due to a low base as exports to India were also lower than usual last month because of logistical hindrance.
Total cement offtake in July 2012 was registered at 2.81 million tons compared to 2.86 million tons last year, depicting a decline of 1.6 per cent YoY. Local dispatches came in at 2.05 million tons, up 1.5 per cent YoY, while exports remained weak, plummeting by 9.2 per cent YoY to 0.76 million tons on the back of lower exports to Afghanistan. On a monthly basis, total dispatches dipped by 7.0 per cent, with local sales plunging by 10.3 per cent due to the slowdown in construction activity with the arrival of Ramazan. However, construction activity is likely to pick up pace post-Ramazan and Eid which will lift overall cement sales.
Experts said that mainly due to the arrival of Ramazan and partially due to the monsoon season and power outages in the North, local sales decreased by 10.3 per cent MoM in July-12 to 2.29 million tons. In experts view, this is a seasonal slump and it is expected improvement in local sales post Ramazan and Eid. Moreover, resilience of cement prices in seasonal downturn periods is an encouraging sign. This will likely assist the industry to sustain its healthy margins going forward.