Pakistan cement demand expected to rise in floods aftermath

Sindh Chief Minister Murad Ali Shah has stated that the provincial government would start building homes and other civil infrastructures for flood victims as soon the water has receded in Sindh province. The other provinces will follow in their footsteps. Furthermore, Pakistan’s top cement manufacturers expect domestic demand for cement to pick up in 3-6 months, as soon as rehabilitation works are started under aid from various foreign countries and government allocation. The federal government has already shifted some funds from Public Sector Development Programme to flood refugees.

The recent floods have severely impacted Pakistan, leading to massive damage to the country’s physical infrastructure, including homes, roads, bridges and crops. According to the National Disaster Management Authority (NDMA), in the period up to 14 September 2022, there has been a cumulative loss of 1.76m houses (partially and fully damaged), 390 bridges and 12,718km of roads.

Topline Research surveyed Pakistan’s leading cement manufacturers to understand better the situation and sector’s outlook after the floods. These manufacturers cumulatively represent 76 per cent of the total industry size in terms of plant capacity. The research house expects a fall in cement dispatches in FY22-23. It anticipates cement dispatches to decline by 12 per cent in FY22-23, followed by an increase of 11 per cent in FY23-24, as the reconstruction of infrastructure will result in increased demand for the sector, especially when federal and provincial governments will increase spending in an election year.

However, cement prices remain flat during FY22-23 from the current levels as it would be tough for manufacturers to increase costs further, given the existing economic environment.  

Still, there are concerns about planned capacities that could again cause pressure on cement pricing. But the research house believes that the planned capacities could face delays, especially in greenfield projects where the central bank had imposed restrictions on the import of machinery. Thus, the scheduled capacities expected in FY22-23 and FY23-24 could be delayed to FY23-24 and FY24-25.