KARACHI: As per the data released by All Pakistan Cement Manufacturer Association (APCMA), total cement dispatches for the month of March’19 arrived at 4.34mn tons versus 4.65mn tons recorded during the same month last year, exhibiting a decline of 7%YoY, primarily due to double-digit decline (-15%YoY) in North sales.
Local dispatches for Mar’19 clocked in at 3.86mn tons, depicting a fall of 9%YoY. Northern region continues to drag local volumes down with a fall of 13%YoY to 3.07mn tons during the month. “Slowdown in economic activity and increase in policy rate discouraged construction activity during the month,” a report issued by Pearl Securities said.
However, South continues to alleviate the pressure on overall dispatches as Southern players posted sales growth of 10%YoY in March’19 owing to low base effect last year.
On the export front, dispatches surged 23%YoY to 0.48mn tons during March’19. South continues to drive growth in exports with the region exporting 0.35mn tons during March’19 (+102%YoY) whereas exports from north also continue on their downward path (-40%YoY) to 0.13mn tons. “Availability of cheap Iranian cement in Afghanistan along with restriction by Indian authorities over exports from Pakistan affected cement export volumes in North,” Pearl Securities report noted.
During 9MFY19 (July-March 2018/19), total industry dispatches stayed flat (-1%YoY) at 34.58mn tons, with local sales & exports at 29.44mn tons (-6%YoY) & 5.13mn tons (+49%YoY), respectively.
Depressed sales in the Northern region during 9MFY19 (local: -10%YoY, exports: -18%YoY) have been the protagonist behind stagnant industry volumes as lower development spending continues to impair local demand whereas decline in exports, particularly to Afghanistan have also adversely impacted volumes. Industry’s capacity utilization during 9MFY19 decreased 13ppsYoY to 83%.
During March’19, cement prices in North declined by PKR 10/bag to PKR 597/bag. With successful commissioning of cement line 3 by Cherat Cement (CHCC) this quarter (6,700 TPD clinker), industry sources signal that prices could come under further pressure in the upcoming months.
Moreover, cement prices in South remained relatively stagnant at PKR 632/bag during Mar’19. Prices have thus far remained firm in South as higher local & export volumes have incremented utilization levels despite the capacity additions from Attock Cement (ACPL), D.G Khan Cement (DGKC) and Lucky Cement (LUCK).
Coal price during Mar’19 further declined 6%MoM to US$79.50/ton whereas current coal price (US$68.50/ton) is already 14% lower than Mar’19 levels.
“The significant decline in coal price is mainly due to delays by Chinese authorities on account of quality tests before clearing Australian coal from Chinese ports. The lethargic process adopted by Chinese authorities has discouraged most Chinese vendors to procure Australian coal. The prevalent decline in coal prices is likely to provide some relief to industry margins, however, this positive impact is likely to be mitigated as a result of the ongoing PKR devaluation,” the brokerage house reported.
Going forward, as the government continues to follow its mantra of implementing stabilization policies on the macroeconomic front, development spending is likely to remain on the lower side, thereby adversely affecting cement dispatches.
With total cement dispatches remaining almost flat (-1%YoY) during 9MFY19 and construction activity likely to decline further owing to Ramadan effect in the last quarter, analysts expect total cement sales to exhibit single-digit fall during FY19 as compared to previous fiscal year.
Although PKR devaluation has amplified export volumes, however, the negative impact on margins has dented sector’s profitability and continues to remain a concern for the industry.[the_ad id=”31605″]