Pakistan cement likely to face challenges

Pakistan's cement industry is expected to face challenges ahead in view of an increase in production capacity in the north and south, the surging cost of coal prices and a cut in the Public Sector Development Programme (PSDP) in FY18-19. These developments are expected to impact on cement prices as well as capacity utilisation – industry experts anticipate and suggest exports are the only respite in the difficult time ahead.

With falling capacity utilisation rates over the medium term, prices are predicted to face downward pressures, according to analysts. Furthermore, prices in south may witness steep correction (PKR60/bag over next two years), as DG Khan Cement's new expansion has started its run, while prices in the north may continue to decline as new capacities commence operation. Bestway Cement has reportedly started trial runs.

A growth of 16, 12 and nine per cent in exports for FY19, FY20 and FY21, respectively on account of excess capacity and recent currency depreciation, with southern players gaining major share of increased exports. Though exports draw thin margins, they will be instrumental in maintaining healthy plant utilisations for new capacities.