KARACHI: As per the data released by All Pakistan Cement Manufacturers Association (APCMA), total cement dispatches for the month of November 2018 arrived at 3.90mn tons versus 3.94mn tons registered during the same month last year, down by a meager 1.0 percent.
“The decline in dispatches during the month was largely due to slowdown in cement demand in the Northern region despite robust growth witnessed in South,” Bilal ul Haq at Pearl Securities said.
During Nov’18, local dispatches clocked in at 3.34mn tons as against 3.59mn tons reported during the same month last year, depicting a fall of 7.0 percent. The decline in local dispatches was mainly due to weak cement demand in the Northern region where sales truncated 7.0 percent to 2.63mn tons during the month.
Whereas in South, local sales recorded double digit growth of 13 percent at 0.71mn tons.
On the export front, dispatches continued their northbound journey, posting a hefty growth of 61 percent at 0.56mn tons during Nov’18 as against 0.35mn tons last year.
With respect to regional performances, Southern manufacturers continued to dominate the volume chart, exporting 0.32mn tons during the month to record a monumental growth of 360 percent.
Contrarily, exports from north witnessed a decline of 14 percent at 0.24mn tons.
“The persistent rise in south based exports is attributable to additional capacity available in the region post Attock Cement (ACPL), Lucky Cement (LUCK) and D.G Khan Cement (DGKC) expansion in addition to benefits of rupee depreciation,” Bilal said.
On a cumulative basis, total cement dispatches during 5MFY19 (July-November) clocked in at 19.2mn tons up 4.0 percent, wherein local and exports sales arrived at 16.3mn tons (down 1.0 percent) and 2.97mn tons (up 43 percent), respectively.
The subdued growth in dispatches during the period was primarily due to depressed local and export cement demand in the Northern region, which exhibited an attrition of 6.0 percent and 20 percent, respectively.
“The fall in local cement demand is attributable to economic slowdown amid a contractionary macro environment where unfavorable policies by the incumbent government have led to demand stagnation,” Bilal said.
Moreover, industry’s capacity utilization during five monrhs declined to 83 percent versus 93 percent in the same period last year.
In Nov’18, sea based exports continued with their upward trend reporting a monumental growth of 337 percent, which is primarily due to excess capacity available in South following ACPL, LUCK and DGKC expansion. Furthermore, exports to India jacked up 22 percent while to Afghanistan it declined 29 percent.
During Nov’18, cement prices in North averaged Rs603/bag versus Rs614/bag in the preceding month, down 2.0 percent MoM. The dip in prices was primarily due to contraction in cement demand in the region.
However, in a recent development, cement prices in North have been increased by Rs10/bag to pass on the impact of rupee devaluation (4.0 percent in Nov’18). Currently, the average cement price in North is hovering around Ra600/bag.
Likewise, prices in South averaged Rs619/bag during Nov’18. Pricing discipline in South has so far remained intact despite additional capacity available in the region following the expansion by LUCK, ACPL and DGKC.
“However, we expect prices to come under pressure as new capacities add up to the industry’s pipeline going forward”.
Coal prices during Nov’18 plunged 5.0 percent MoM to average $95/ton as against $100/ton in the prior month. The decline in prices was mainly due to ban imposed by Chinese authorities on coal imports from across the globe, which is not expected to be lifted until early next year.
Currently, the prices are trading around $95/ton, which analysts expect to be maintained at current levels for at least next 2-3 months due to slowdown in Chinese demand as the worlds largest consumer remains adequately supplied with the fossil.
Going forward, with government policies targeting towards contracting fiscal space coupled with weak macros and tightening monetary regime, “We expect the country’s aggregate demand growth to slowdown which in turn would affect the cement consumption of the country,” a Pearl Securities research report noted.