Business Recorder (BR) Research
Cement dispatches figures are out for the first seven months of 2014, and by no means do they present a bleak picture. While one region is high on rising domestic dispatches, the other is gearing up for growing export demand.
Total demand for cement during 7MFY14 clocked in at 18.58 million tons, up 1.41 percent over same period last year. While the year-on-year improvement may sound meagre compared to last year’s four percent, the devil lies in the detail.
Seven-month exports from the South region posted a year-on-year growth of 33 percent, increasing by nearly 60 thousand tons per month. Southern exports rose on account of buoyant demand for cement from the African continent and the GCC countries, while finally crossing the two million tons barrier after a gap of two years.
The rise in exports by sea outpaced production of cement in South, with as much as 41 percent sea export demand during the period being met by producers up North. Yet, the growth was still not enough to make up for the dwindling exports to Afghanistan, which declined 14.4 percent during the period. Exports to India showed some improvement, yet too little to pull up total exports of the country, which declined by 0.84 percent during the seven-month period.
Domestic dispatches, on the other hand, seem to present a different story altogether. Fortunately for the manufacturers, the alarm bells that were sent ringing after the slowdown in dispatches during the first two months of FY14 were proven to be false. Local sales managed to rise by 2.17 percent over last year to 14.15 million tons, despite a lacklustre demand in the South region.
Still, the growth witnessed during FY14 is much slower than expected as expected major PSDP allocations to infrastructure failed to materialize in the aftermath of elections.
To recall, domestic cement dispatches had risen by nearly eight percent in FY13, with demand stemming from South as much as from the North region. Predictions were made that domestic sales would continue their buoyant drive during FY14, at a time when exports had continued to fall by six percent as cheaper Iranian cement emerged as main rival in major export markets of GCC and Afghanistan.
However, not all is gloom and doom in the local market. Sales in the North region rose by nearly four percent during the seven-month period, after receiving a major push during November post Eid-ul-Azha. The rejuvenated demand in North has continued ever since, with demand in January alone rising by five percent compared to same month last year.
Still, the slow performance of Southern sales managed to pull down domestic dispatches despite a push from the North. Regional sales declined by 5.5 percent during the quarter, allowing total domestic dispatches to post a stalled growth of 0.11 percent during these seven months compared to last year.
If the trend during the previous years is any guide, domestic sales will pick up come third quarter of FY14 as demand normally picks up in spring time. And even if significant growth in domestic sales does not materialize, exports by sea will continue to be the number to watch after its double-digit growth witnessed during the first half.
