Higher power prices send cement prices up in Pakistan

Construction costs in Pakistan are expected to rise due to a hike in industrial electricity tariffs, effective from 1 July 2023.

As agreed with the IMF under its US$3bn standby arrangement, the government notified an increase in electricity prices for industrial customer by PKR7.50/kWh (US$0.026) and for residential customers by an average of PKR6.45/kWh, according an AHL Research assessment report. This increase in electricity prices is expected to reduce the deficit and circular debt and pass on the impact of higher capacity payments to the end consumers. As per the Ministry of Energy monthly report, during 11MFY22-23, the stock of circular debt increased by PKR394bn to PKR2646bn.  

In terms of the cement sector, cement prices will have to be raised by ~PKR 45/bag (including GST) to fully pass on the impact of the electricity tariff hike. While cement producers have seen coal prices fall from US$337/t to US$97/t, creating room to absorb the higher power costs, it is expected that price rises will be passed on to the end consumers.