Pakistan receives a mixed outlook for 2018

Pakistan’s cement industry is expected to face a series of challenges in 2018 such as decreasing profitability, high interest rates and an increase in coal prices. These factors make a high profit margin for the sector unlikely in the coming years.

Reports show that cement bag prices have been placed under pressure by the opening of Cherat Cement’s second production line in the northern region. Alongside this, international coal prices rose by 23 per cent in the first quarter of FY2018 to US$91.50/t when compared to the year-ago period. The recent depreciation of PKR against US$ by 4.7 per cent will increase the interest rate. This is expected to lead to a slowdown in economic growth, resulting in a low demand for local cement dispatches.

However, 2018 is also election year in Pakistan. Therefore, the local demand of cement is likely to rise as construction work designed to attract the support of voters takes place.

The southern region of Pakistan is forecasting a 5.2Mta increase in capacity by the end of FY18, whilst in the northern region a total capacity expansion of 15.6Mta could be active by FY21. These upcoming capacities are expected to generate a price competition between industry players.