September 05, 2022 (MLN): Cement despatches declined by 24% in August 2022 to 3.3 million tons against 4.34mn tons during the same month last fiscal year, the latest data released by the All-Pakistan Cement Manufacturers Association (ACPMA).
However, on monthly basis, the total despatches showed an increase of 62% in August 2022.
Details made available by the association, the local cement despatches by the industry during the month of August 2022 were 2.9mn tons compared to 3.81mn tons in August 2021, showing a decrease of 24%. The fragile macro and political environment, higher input costs, mounting inflationary pressures, and a harsh monsoon season that rattled the country in the said month, resulted in a decline in construction demand, a research report by AKD noted.
Export despatches also suffered a decline of 26% as the volumes reduced from 0.52mn tons in August 2021 to 0.39mn tons in August 2022. This fall in exports may be attributable to low prices of exports coupled with increasing coal prices have made exports unattractive, it added.
This took local cement despatches to 4.8mn tons during 2MFY23, registering a fall of 34% compared to the same period last fiscal year.
However, on monthly basis, local despatches showed an increase of 55% in August 2022 due to a lower base.
Region-wise, the North and South witnessed a decline in local despatches. Northern region sales stood at 2.5mn tons, down by 20% YoY while despatches in the South decreased by 40% YoY to 0.41mn tons.
The local construction sector was expected to remain under pressure even before the catastrophic and torrential rains hit all parts of the country, resulting in massive floods.
Now, to add to the prevailing woes of the sector in the form of soaring coal and fuel prices, construction demand is likely to undergo serious demand destruction, especially in 1QFY23, where total cement dispatches are already down 35%YoY in 2MFY23 and we expect the demand to continue the same downward trajectory, Mohsin Ali at AKD Securities said.
However, in the medium term, it is believed that the rehabilitation process in the flood-hit areas is likely to bring construction demand back on track where rough estimates suggest that around 5-6mn tons of demand are likely to be generated as 2.5-3mn new houses are to be built, as per news flow, he added.
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