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Monthly Cement Update by APCMA

All Pakistan Cement Manufacturing Association (APCMA) released cement dispatches numbers for the month of Jan-14. According to the report, total cement dispatches for the month witnessed downfall of 4.7%MoM to 2.73mn tons, due to the 3%MoM fall in local dispatches to 2.16mn tons. This drop is mainly the result of extreme winter season across the country especially in Northern region. Moreover, the on-going sluggish demand from Afghanistan and India had an adverse impact on our exports. As a result, exports plunged by 10%MoM to 0.56mn tons in Jan-14.

Dispatches touched 18.86mn tons in 7MFY14

Total dispatches in 7MFY14 hit 18.86mn tons depicting a growth of 1.3%YoY as compared to 18.61mn tons in same period of previous fiscal year.

According to Research Analyst Kumail Chevelwalla, this growth is primarily led by local dispatches which surged by 2.1%YoY to 14.15mn tons due to higher PSDP spending by the government during the period. According to the latest reports, government has released PKR180bn or 33% so far under PSDP against the total allocation of PKR540bn for the FY14.

However, government should have released PKR216 or 40% (according to prescribed mechanism), depicting a shortfall of only PKR36mn or 6% of total allocation. On yearly basis, local dispatches surged by 1.3% against 2.13mn tons recorded in Jan-13.

Exports sustained their declining trend

Cement manufacturers are still facing tough time in international market as in 7MFY14, local cement manufacturers exported 4.71mn tons against 4.75mn tons in same period of previous fiscal year (down 0.8%YoY). The share of exports in total dispatches has declined by ~60bps to 25% in 7MFY14 where it was 26% in 7MFY13. Due to the tough competition with Iranian cement in Afghan market, cement manufacturers are more focusing towards local market for better margins. Whereas, cement produced in southern region have found their way into African market. The share of Afghanistan in total exports has plunged to 48% in 7MFY14 which was 56% in 7MFY13.

Demand may rise again!

We expect cement demand to recover further in upcoming months as construction activity would speed up owing to uptick in PSDP releases compared to previous half. Moreover, construction activity in private sector would also speed up as winter season is almost over. In this regard, we remained firm at our previous estimates that total dispatches will clock in at 33.1mn tons (24.8mn tons local & 8.3mn tons exports) in FY14.

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