Pakistan: dispatches expected to reach 3Mt in September

Total cement dispatches for Pakistan are expected to remain flat at around 3Mt for September 2016 in comparison to September 2015. In a research report, Topline Securities forecast that local sales for the month would stand at approximately 2.4Mt, a two per cent drop YoY and 20 per cent decrease MoM as a result of the monsoon in the initial days of the month.

Analyst Nabeel Khursheed said, “We have excluded clinker sales to Fauji Cement, which is expected to come at 200-230,000t during the month. Including clicker, local sales of cement manufacturers are likely to post nine percent YoY growth in September 2016. On monthly basis, sales were down as a result of high base effect (lower number of days in Sep 2016 due to Eid holidays).”

The report went on to predict cement exports to stand at around 0.5Mt, up 11 per cent YoY but down seven per cent MoM. Mr Khursheed commented, “exports are likely to improve YoY on the back of higher dispatches to Indian market.”

Retail prices in September were in the range of PKR524-550/bag in the north and PKR567/580/bag in the south. The nationwide average price was down PKR2/bag when compared to August at PKR550/bag. In regards to pricing, Mr Khursheed said that a rise in production is not expected to have an effect on prices: “So far, 11 cement producers have announced an expansion of around 22Mt… (and) raised concerns of a possible excess supply in the coming year. However, we downplay any such risk and continue our liking for the sector.”

Cement sales grew an average of eight per cent per annum between 2006-17 and 2015-16. Capacity utilisation is expected to remain at 90 per cent even in sales increase by nine per cent YoY over the next five years.