Cement prices surge in Pakistan

July 11, 2024 (MLN): Cement prices in Pakistan recorded the largest weekly gain in at least seven years, posing a risk to already subdued consumer demand in the near future.

Retail price per 50kg bag jumped 10.4% to Rs1,409 compared to Rs1,276 a week before, according to data released by the Pakistan Bureau of Statistics.

That is a gain of Rs133 per bag in Rupee terms.

Meanwhile, prices in the north region gained 11.3% during the week, with Peshawar seeing the largest advance of 13.4%.

The south region’s cement prices increased by 9.1% WoW, with Larkana seeing the largest weekly increase of 17.4%.

To note, the government last month passed the budget for fiscal year 2024-25, wherein it hiked the rate of FED on cement by 50% to Rs3 per kg.

The government also increased excise duty from Rs2,000 per ton to Rs4,000 per ton in budget 2024-25, which may dampen the demand further.

The demand has already remained subdued during fiscal year 2023-24.

Total cement despatches remained largely unchanged at 45.29 million tons during FY24 as against 44.58m tons despatched during last fiscal year, according to All Pakistan Cement Manufacturers Association data.

Domestic despatches in this period were 38.18m tons against 40m tons during last year showing a reduction of 4.6%.

North based Mills despatched 31.55m tons cement domestically during the fiscal year ended June 30, 2024 showing a reduction of 3.8% than cement despatches of 32.78m tons during July-June 2023.

Domestic despatches by South based Mills during FY24 were 6.64m tons showing reduction of 8.3% over 7.24m tons cement despatched during the same period of last fiscal year.

A spokesperson for the All Pakistan Cement Manufacturers Association emphasized that domestic market is pivotal for cement industry and decline in its uptake during the fiscal year ended June 30, 2024 calls for serious attention from policy makers.

He said that the situation calls for lowering duties and taxes on cement, but on the contrary, the government has increased excise duty from Rs2,000 per ton to Rs4,000 per ton in budget 2024-25 that is likely to dampen the demand further.

Cement is not a luxury item but is a basic necessity and government must take measures to reduce the construction cost, to make it affordable for the masses, he further added.

The capacity utilization of Pakistan's cement industry dropped to 54.6% during fiscal year 2023-24 (July-April), its lowest level since at least 17 years.

Despite an overall production capacity of 82.25 million tonnes, the total dispatches, including domestic and exports totaled just 37.45m tonnes during the first 10 months of FY24.

Read: Cement industry’s capacity utilization slumps to 17-year low

Read: Cement sector’s profit rise 6.7% YoY in Q1 amid economic challenges

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