The declining trend of cement exports continues to worry Pakistani manufacturers as cement exports to Afghanistan have plummeted by 10 per cent annually, owing to availability of cheaper Iranian cement there.

The industry said that the energy crisis and constant hike in petroleum products have made its product uncompetitive even in the 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 a four-year CAGR of 14 per cent. Afghanistan is still the steadiest market for the Pakistani cement industry.

However, ever-rising prices of fuel and power in Pakistan have seen the cement makers’ competitive edge vs Iranian cement erode and cap their market share.

The overall cement exports plunged by 9.2 per cent YoY to 0.76Mt 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 issues. Total cement sales in July 2012 were registered at 2.81Mt compared to 2.86Mt last year, depicting a decline of 1.6 per cent YoY. Local dispatches came in at 2.05Mt, up 1.5 per cent YoY, while exports remained weak, plummeting by 9.2 per cent YoY to 0.76Mt on the back of lower exports to Afghanistan.

On a monthly basis, total dispatches dipped by seven per cent, with local sales plunging by 10.3 per cent due to the slowdown in construction activity with the arrival of Ramadan. However, construction activity is likely to pick up pace post-Ramadan and Eid, which will lift overall cement sales.

Experts said that mainly due to the arrival of Ramadan and partially because of the monsoon season and power outages in the north, local sales decreased by 10.3 per cent MoM in July to 2.29Mt. Analysts suggest that this is a seasonal slump and it is expected improvement in local sales post-Ramadan 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.

In addition, the recent pledge of US$16bn 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.