ISLAMABAD: Pakistan’s cement sector is experiencing a notable downturn, with dispatches in July 2024 falling to 3.01 million tons—a decrease of 6.8% year-on-year (YoY). This decline is largely attributed to a deceleration in construction activity, driven by soaring construction costs and high interest rates.
According to the AKD Research, the drop in offtakes has led to a significant reduction in industry utilization, which has fallen to a two-year low of 43%. Breaking it down regionally, the North saw an even steeper decline with utilization at 39%, while the South fared better at 56%.
Adding to the industry’s woes, the Punjab government’s recent decision to increase royalty rates on limestone mining is poised to triple the cost of limestone for cement manufacturers. This development is expected to push cement prices higher by approximately PKR 50-60 per bag.
Given the anticipated rise in cement prices, local demand is projected to decrease by 2-2.5% YoY for the fiscal year 2025, a revision from earlier forecasts of stable growth. Despite these challenges, analysts maintain a positive outlook for the sector, bolstered by strong gross margins, robust earnings, and potential monetary easing.
Among the cement companies, LUCK and FCCL are highlighted as preferred picks due to their solid performance and growth potential.
As the industry navigates these turbulent economic conditions, stakeholders will be closely watching how these factors play out in shaping the future landscape of Pakistan’s cement market.
