Low capacity utilization hits hard cement industry

Karachi: During first five months of current fiscal year, the cement industry has posted a meager growth of 0.30 percent compared with the same period during last fiscal year. Total despatches during this period were 13.167 million Tons against 13.127 Million tons during the corresponding period of last fiscal year.

During the month of November 2013, local sales of cement posted growth of 8.61 percent while exports declined by 12.84 percent, resulting in an overall marginal growth of 3.03 percent compared to same month of last fiscal year. The increase in domestic consumption was offset by substantial reduction in exports.

Data compiled by All Pakistan Cement Manufacturers’ Association (APCMA) showed that total sales of cement during November 2013 were 2.731 million tons compared to 2.650 million tons during the same month of last fiscal year. The domestic sales increased to 2.13 million tons during November 2013 from 1.96 Million tons during November 2012 while the exports declined to 600,000 Tons from 689,000 Tons.

Capacity utilization during first five months of current fiscal was only 70.79 percent that is the lowest recorded capacity utilization since last five years. Industry circles have expressed concerns that the main reason for low capacity utilization is attributed due to poor economic growth in the country.

“The export to Afghanistan is declining gradually due to slow pace of new project development in the country,” said the spokesperson of APCMA adding that expected withdrawal of NATO forces from Afghanistan has also created an uncertainty in the country. India is also experiencing economic slowdown resulting in reduction in cement demand.

The cost of production of cement industry is rapidly going up due to increase in transportation cost, electricity cost, hike in interest rates and fast pace of Pak rupee devaluation. The margins are also under pressure due to these factors.

The recent hike in cement prices is also attributed mainly due to additional taxes imposed by government of Pakistan on cement industry. The packaging cost has also increased due to new taxes being imposed on import of sack Kraft paper. Going forward the industry is working to open new export markets to offset the decline in Afghanistan exports.

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