Mounting challenges for Pakistan cement producers

Pakistan's cement industry faces strong headwinds with new tax measures, an increase in gas and electric prices, unrest among cement distributors and retailers, dwindling local demands and negligible export to neighbouring countries, says a local research house.

BMA Capital Management reports that challenging demand/supply outlook amid rising cost of operations triggered by supply chain constraints, a rise in federal excise duty (FED), etc has led to added pressure on cement prices. The emerging risks for sector profitability and margins have also been reflected in sector price performance (down 18 per cent in past three months).

An analyst at BMA Capital Management recalled that FED on cement prices has been raised by 33 per cent to PKR2000/t (US$12.63/t) in the FY20 budget. Although, cement manufacturers have recently attempted to pass on the impact of increases in FED to end consumers (prices were raised by PKR15‐20/bag post budget), the same failed to sustain given strong demand/supply hinderance.

Meanwhile, Attock Cement, Power Cement and Dewan Cement have revised cement prices of their different brands ranging between PKR590 to PKR715 per bag, effective from 1 July 2019.

Furthermore, the meeting between representative of All Pakistan Cement Distributors Association and Federal Board of Revenue (FBR) Chairman Shabbar Zaidi at the Lahore Chamber of Commerce & Industry (LCCI), along with Minister of State for Revenue Hammad Azher, Provincial Minister for Industries Mian Aslam Iqbal, on 6 July, was inconclusive and cement dealers are yet to announce their future action, whether to resume pick-ups of cement from factories or to continue their protest.