Pakistan’s cement sector strained by high energy prices

November 19, 2018 (MLN):  FY2018 has proved to be quite a difficult year for the Pakistan Cement Sector mainly due to the hike in prices of Coal, FO, Brent by 20%, 27% and 26% YoY respectively, amidst limited pricing power and trepidations over the upcoming excess supply. This was in spite of the fact that capacity utilization of the cement industry reached 93%, with the highest ever number of incremental dispatches recorded in the same year.

According to the report by Taurus Securities Limited, the commencement of CHCC's Line III in Dec-18 may further cause the prices to breakdown in the northern region as CHCC has a history of fighting for market share albeit offering lower prices and discounts and hence advise a cautious stance on the sector from hereon.

Furthermore, the FY2019 for the cement sector is forecasted to remain under pressure wherein a cut down in the Federal PSDP spending in a general contractionary macro environment is bound to take its toll on the domestic dispatches which are expected to post a negative growth rate for the first time since FY2011. However, exports from the southern players are expected to push the total dispatches towards positive growth, the report added. 

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