LAHORE, July 13 (INP)): The country’s total cement sales during the concluding fiscal year of 2018-19 is expected to remain flat, closing in at around 46 million after a long time of 7 years, mainly due to slower economic growth.
According to cement industry experts, total domestic sale of FY19 is expected to decline after seven years; down by 3% annually to 39.8 million tons versus 41 million tons during FY18. The primary reason for domestic sales attrition can be attributable to decline in government spending, sluggish growth in GDP growth, and rising inflation and interest rates affecting housing sector.
The region wise data suggests that sales from the northern region are anticipated to decline by 6% YoY to 31.9 million tons owing to lower than expected demand from governments project due to a high base election year. On the contrary, cement sales in the southern region are expected to grow by 11% YoY to 7.9 million tons due to penetration of manufacturers in the south Punjab market.
According to cement industry experts, effective capacity utilization during FY19 is anticipated to fall by 11ppts to 84% primarily on the back of multiple expansions by various cement companies including Maple Leaf Cement (MLCF), Cherat Cement (CHCC), Bestway cement (BWCL) and DG Khan Cement (DGKC).
They said that total export sales is likely to grow by 37% YoY to 6.5 million tons majorly contributed by southern region, with sales expected to witness a growth of 141% YoY to 4mn tons. However, sales from the northern region are anticipated to fall by 19%Y oY to 2.5mn tons, respectively.
According to a report of Topline, the primary reason for healthy export sales remains the favorable dynamics in sea-based exports markets which have continued to benefit south based cement manufacturers.
The analyst Suhail Ahmed observed that the new cement markets situated in East African and Far Eastern countries coupled with heavy clinker sales to Bangladesh; available due to the scarcity of supply from Vietnam have significantly added to the export sales of the region.
On the other hand, border tension with India (contributed 720,00 tons and 1.2mn tons in 9MFY19 and FY18) during Feb-2019 have completely tapered off volumetric sales from the said region denting export sales of the northern region.
He believes domestic cement demand will continue to depict a sluggish momentum primarily on the back of sluggish GDP growth, anticipated double-digit inflation, lower govt spending to manage fiscal deficit and slowdown in the real estate market. While, on the exports side, experts believe southern region sales will continue to depict healthy volumes. However, the north region may depict decline in export sales owing to the absence of Indian market.