Pakistan's utilisation levels expected to keep falling

Current downward trends in Pakistan's domestic cement demand are expected to impact capacity utilisation. Overall cement sales in the country declined by 12 per cent YoY in February 2019 to 3.3Mt, according to Intermarket Securities Ltd, quoting APCMA data. This decline was driven by local cement sales, which fell by 19 per cent YoY to 2.8Mt, with a major drag seen in sales of the north region to 2.1Mt, down 25 per cent YoY.
 
The drop-off in demand could be attributable to several factors, such as lower Public Sector Development Programme (PSDP) disbursements, off-season rain affecting construction activities, and a more challenging macroeconomic environment.

However, exports are a saving grace, albeit only for southern manufacturers. Exports sales surged by 69 per cent to 0.5Mt in February 2019.
 
In 8MFY18-19, local cement sales are down six per cent YoY to 25.4Mt, while exports are up 52 per cent YoY to 4.6Mt (overall sales are flat at 30.1Mt).
 
A weak February brings underlying demand concerns into sharp focus. Based on February 2019 dispatches alone, industry utilisation stood at 71 per cent (against 91 per cent in the same period last year). If this trend of weak sales continues, capacity utilisation may come down even further, particularly as MLCF is set to add 2.3Mt by 4QFY19.