Displaying items by tag: All Pakistan Cement Manufacturers Association
Update on Pakistan, April 2024
24 April 2024Changes are underway in South Asia’s second largest cement sector, with two legal developments that affect the industry set in motion in the past week. At a national level, the Competition Commission of Pakistan recommended that the government require cement producers to include production and expiry dates on the labels of bagged cement. Meanwhile, in Pakistan’s largest province, Punjab, a new law tightened procedures around the establishment and expansion of cement plants. At the same time, the country’s cement producers began to publish their financial results for the first nine months of the 2024 financial year (FY2024).
During the nine-month period up to 31 March 2024, the Pakistani cement industry sold 34.5Mt of cement, up by 3% year-on-year. Producers have responded to the growth with capacity expansions, including the launch of the new 1.3Mt/yr Line 3 of Attock Cement’s Hub cement plant in Balochistan on 17 April 2023. China-based contractor Hefei Cement Research & Design executed the project, including installation of a Loesche LM 56.3+3 CS vertical roller mill, giving the Hub plant a new, expanded capacity of 3Mt/yr.
Pressure has eased on the operating costs of Pakistani cement production, as inflation slowed and the country received a new government in March 2024, following political unrest in 2022 and 2023. Coal prices also settled back to 2019 levels, after prolonged agitation. Pakistan Today News reported the value of future coal supply contracts as US$93/t for June 2024, down by 2% over six months from US$95/t for January 2024.
Nonetheless, cost optimisation remained a ‘strong focus’ in the growth strategy of Fauji Cement, which switched to using local and Afghan coal at its plants during the past nine months. Its reliance on captive power rose to 60% of consumption, thanks to its commissioning of new waste heat recovery and solar power capacity. During the first nine months of FY2024, the company’s year-on-year sales growth of 14% narrowly offset cost growth of 13%, leaving it with net profit growth of 1%.
Looking more closely, the latest sales data from the All Pakistan Cement Manufacturers Association (APCMA) shows a stark divergence within cement producers’ markets. While exports recorded 68% year-on-year growth to 5.1Mt, domestic sales fell, by 4% to 29.4Mt. The association further breaks down Pakistani cement sales data into South Pakistan (Balochistan and Sindh) and North Pakistan (all other regions). Domestic sales dropped most sharply in South Pakistan, by 6% to 5.16Mt. In the North, they dropped by 3% to 24.2Mt. Part of the reason was a high base of comparison, following flooding-related reconstruction work nationally during the 2023 financial year. Meanwhile, the government finished rolling out track-and-trace on all cement despatches during the opening months of the current financial year, and commenced the implementation of axle load requirements for cement trucks. APCMA flagged both policies as potentially disruptive to its members’ domestic deliveries, amid a strong infrastructure project pipeline.
Pakistani producers suffer from overcapacity, but have established themselves as an important force in the global export market. They continue to locate new markets, including the UK in January 2024. Lucky Cement was among leading exporters overall, with a large share of its orders originating from Africa.
On 17 April 2024, the government of Punjab province set up a committee to assess new proposed cement projects, with the ultimate goal of conserving water. Falling water tables are considered a significant economic threat in agricultural Punjab. Besides completing an inspection by the new committee, proposed projects must also secure clearance from six different provincial government departments and the local government. While acknowledging the necessity of the cement industry, the government insisted that it will take legal action against any cement plant that exceeds water allowances.
Pakistan’s cement plants have grown in anticipation of a local market boom. Without this strong core of sales, underutilisation will remain troublesome, especially in North Pakistan where exposure is highest. At the same time, APCMA has given expression to the perceived lack of support affecting production and distribution. For an industry with expansionist aims, new restrictions on its growth and operations can feel like an existential menace.
Pakistan raises first-half cement sales in 2024 financial year
04 January 2024Pakistan: Cement producers despatched 23.9Mt of cement during the first half of the 2024 financial year (1 July – 31 December 2023), up by 9.7% year-on-year from 21.8Mt in the first half of the previous financial year. The Nation newspaper has reported that exports more than doubled, to 3.65Mt from 1.73Mt.
The All Pakistan Cement Manufacturers Association (APCMA) expressed its concern over slow domestic sales. The association said “We are very hopeful that the government will speed up PSDP projects in order to increase cement demand and also give attention to our operational problems. Two major issues currently being faced by the cement industry are related to the new Axle Load regime and Track and Trace system. We have approached the concerned functionaries and expect to get a positive response.”
Pakistan’s August 2023 dispatches rise from low flood-affected 2022 base
06 September 2023Pakistan: Data from the All Pakistan Manufacturers Association (APCMA) shows that local cement industry recorded a 37% year-on-year surge in dispatches during August 2023, with total shipments reaching 4.52Mt, up from just 3.29Mt in August 2022. While impressive on the surface, this appears to represent a return to normality following nationwide disruption due to massive flooding in the summer of 2022.
The APCMA’s data shows that a significant driver of this growth was the domestic market, where cement dispatches rose by 30% to 3.79Mt, compared to 2.91Mt in August 2022. Simultaneously, exports surged by 87%, with volumes growing from 387,440t in August 2022 to 724,777t in August 2023.
Cement plants in the north of Pakistan dispatched 3.25Mt in August 2023, marking a 25% increase from the 2.0Mt dispatched in August 2022. In the southern region, plants dispatched 1.27Mt of cement, an 81% rise compared to the 700,436 tonnes in August 2022.
Exports from northern-based plants increased by 79%, from 91,963t in August 2022 to 164,195t in August 2023. Similarly, southern mills reported a significant increase, with exports surging by 90% to 560,582t in August 2023, up from 295,477t during the same month in the previous year.
An APCMA spokesperson emphasised the industry's challenges, including rapid currency depreciation, soaring petroleum prices and rising electricity tariffs. These factors are driving up production costs and affecting transportation, potentially impacting consumer prices. The spokesperson urged the government to address these issues to support the industry as it navigates this ‘challenging terrain.’
Pakistan: Cement producers despatched 44.6Mt of cement during the 2023 financial year, down by 16% year-on-year from 52.9Mt in the previous financial year. Exports dropped by 13% to 4.57Mt from 5.26Mt. The Dawn newspaper has reported that cement plants in Northern Pakistan accounted for 33.9Mt (76%) of despatches, while those in Southern Pakistan accounted for 10.7Mt (24%).
The All Pakistan Cement Manufacturers Association urged the government to support export-orientated industries. It said “Boosting exports will play a pivotal role in the revival of our economy. Signing of standby agreement with IMF is only an interim solution and we must use our own resources in order to build a stronger Pakistan.”
Pakistan: Pakistani cement companies sold 9.61Mt of cement during the first quarter of the 2022 financial year, down by 25% year-on-year from 12.8Mt in the first quarter of the 2021 financial year. Exports declined by 34% to 1.01Mt of cement, from 1.55Mt. The All Pakistan Cement Manufacturers Association (APCMA) said that current economic conditions impacted both domestic and export sales.
Separately, the APCMA has expressed its concern over State Bank of Pakistan limits on the use of letters of credit by companies for the purchase of spare parts and other machinery. The association says that present restrictive conditions will create operational difficulties for the industry.
Pakistan’s cement sales fall by a quarter in August 2022
07 September 2022Pakistan: Cement sales fell by 24% year-on-year in Pakistan in August 2022, due to increased energy, fuel and transport costs. Total despatches for the month came to 3.3Mt, against 4.3Mt a year earlier, according to data from the All Pakistan Cement Manufacturers Association (APCMA). Local shipments for August 2022 came to 2.9Mt against 3.8Mt in August 2021, a fall of 24%. Exports fell by 26% to 0.39Mt from 0.52Mt in August 2021.
APCMA officials are of the view that the government needs to generate a viable policy for the construction industry, keeping in view the huge damage to national infrastructure after unprecedented recent flooding.
Pakistan: All Pakistan Cement Manufacturers Association (APCMA) members despatched 52.9Mt of cement in the 2022 financial year, down by 7.9% year-on-year from 57.4Mt in the 2021 financial year. The News International newspaper has reported that exports fell by 44% year-on-year to 5.25Mt from 9.31Mt. In June 2022, despatches rose by 1% year-on-year to 5.26Mt from 5.21Mt. Exports declined by 48% to 284,000t from 543,000t. APCMA said that high costs caused the decline, which continues into the current 2023 financial year (which begun on 1 July 2022).
An association spokesperson said “The export of cement has declined massively during the ongoing financial year due to the high cost of production.”
Pakistani 10-month cement sales drop in 2022
11 May 2022Pakistan: Cement producers in Pakistan sold 44.3Mt of cement in the first 10 months of the 2022 Pakistani financial year, which runs from 1 July 2021 to 30 June 2022, down by 8.2% year-on-year from 48.3Mt in the corresponding period of 2021.Members of the All Pakistan Cement Producers Association (APCMA) record domestic deliveries of 39.5Mt, down by 1.8% from 40.2Mt, and exports of 4.8Mt, down by 40% from 8.02Mt.
The association said that political and economic uncertainty in March 2022 had stalled construction sector investments. It called on the government to help to increase sales and reduce the cost of cement production.
Update on Pakistan, March 2022
16 March 2022Cement producers in the north of Pakistan have started to increase their use of coal from Afghanistan in response to the ongoing volatility in energy markets. Research from a report by Darson Securities found that companies were already using up to 70% Afghan coal in their fuel mix with a further 20% being considered. Most of the northern producers are reported to have secured the cheaper Afghan coal for about two months of inventory, although Maple Leaf Cement was said to have four to five months of inventory. Meanwhile in the south of the country, producers were reported to be facing a tougher situation as Afghan coal costs more for them due to higher logistics charges and export orders were being reduced due to the low cost of clinker internationally. So they are focusing on the domestic market instead.
Graph 1: Cement despatches in Pakistan, 2015 – 2021. Source: All Pakistan Cement Manufacturers Association.
Data from the All Pakistan Cement Manufacturers Association (APCMA) shows that cement despatches have been steadily growing since the mid-2010s with a blip in 2020 caused by the start of the Covid-19 pandemic. The upward trend has been driven by local sales. Exports have generally grown at the same time, with more variance, but they are yet to regain the high of nearly 11Mt reported in 2009. On a rolling annual basis, local sales have remained steady since mid-2021 but exports have been slowly falling. In April 2021 they were 9.17Mt but by February 2022 they were 7.33Mt. For the February 2022 figures APCMA blamed this on the growing cost of production, rising international freight rates, mounting coal prices and a trade ban with India. On that last point for example, Pakistan-based producers exported 1.21Mt of cement to India in the 2017 – 2018 financial year before exports stopped after February 2019. Despite a brief respite in the spring of 2021 talks are still ongoing to resume trade with India.
On the corporate side the country’s largest cement producer by capacity, Lucky Cement, drew the same conclusion as the APCMA with its half-year results to 31 December 2021. Its local sales volumes were down a little but its exports were down a lot. It noted that the reason its local sales were falling but national industry local sales were up slightly was due to some competitor plants being non-operational in the previous year. However, the company managed to keep sales revenue and earnings increasing year-on-year by successfully combating growing input costs with price rises. Bestway Cement, the country’s other large producer, reported a tougher situation in the second half of 2021, with both local sales and export volumes down. This was attributed to a boom in construction activity in the second half of 2020 as Covid-19 lockdowns were eased. Demand for cement since then was said to be ‘sluggish’ due to inflation and high commodity prices. It also pinned its marked fall in exports on political and economic instability in Afghanistan. However, turnover and operating profit were both up due to higher selling prices.
Elsewhere in the sector news since the start of 2021, Pakistan’s exports to South Africa remained stymied in early 2020 due to a review of ongoing tariffs and the government decision to restrict infrastructure projects to only using locally produced cement. On the sustainability front the APCMA started to set out its decarbonisation strategy in November 2021. It may have a long way to go given that a think tank reported earlier in the year that the cement sector was the largest emitter of coal-related CO2 emissions in the country, even more than power generation. Alongside this plenty of capacity additions have been announced. Lucky Cement started commercial cement production at its 1.2Mt/yr integrated Samawah cement plant in March 2021. Various new cement plants and upgrades to existing plants have been proposed by Bestway Cement, Cherat Cement, Fauji Cement, Kohat Cement Company, Lucky Cement and Maple Leaf Cement. Finally of note to a sector troubled by energy prices, in September 2021 the Pakistan International Bulk Terminal said it was going to upgrade its coal handling capacity to around 17Mt/yr by 2024.
Last week’s Global Cement Weekly covered Turkey. The contrasts are interesting because both of these countries have high cement exports and have raised energy concerns recently. This leads to the question of whether other cement exporters may be vulnerable to the current situation. Pakistan isn’t the only country where the cement industry is facing the negative effects of growing energy costs. This week in the sector news, Spain-based Tudela Veguín has shut down the kiln at its La Robla plant down for 10 days due to high electricity prices, Thailand-based Siam Cement Group (SCG) announced it was reviewing its investment plans and the UK-based Mineral Products Association lobbied the government on the issue.
The shift to Afghan coal by Pakistan’s cement producers is rational given the current situation. No doubt fuel buyers all over the world are doing similar things. In January 2022 the International Monetary Fund (IMF) forecast that Pakistan’s gross domestic product would grow by around 4% for 2021, 2022 and 2023 but current geopolitical events may test these estimates. Over the last year domestic cement demand has remained strong but inflation, growing input costs and the impetus to further rise prices may change this. Meanwhile, lots of new production capacity is in the pipeline and, if or when it is built, it may add additional competition pressure. This may present a problem in Pakistan if capacity utilisation levels drop but input costs keep on going up.
Pakistan: All Pakistan Cement Manufacturers Association (APCMA) members exported 405,000t of cement in February 2022, down by 34% year-on-year from 616,000t in February 2021. Domestic deliveries also dropped, by under 1% to 3.95Mt from 3.96Mt. Amid the declines, Pakistani cement producers have reported a steep rise in their costs due to increases in international freight rates and coal prices and the country’s on-going ban on trade with neighbouring India. Cheaper Iranian cement has undercut Pakistani cement sales to Bangladesh, while the Afghan market has yet to recover following the withdrawal of peacekeeping forces.