Cement dispatches decline by 25% in April 2024
Overview of Cement Dispatches
In April 2024, cement dispatches in Pakistan fell to 2.94 million tons, showing no year-over-year growth but a significant 25% month-over-month decline. This drop is attributed to fewer working days due to the Eid ul Fitr holidays and Ramadan. The total dispatches for the first ten months of the fiscal year 2024 (10MFY24) reached 37.4 million tons, marking a 2% increase from the previous year. However, this growth was mainly driven by exports, as local dispatches fell by 4% year-over-year.
| Metric | Feb-24 | Mar-24 | Apr-24 | YoY Change | MoM Change | 10MFY23 | 10MFY24 | YoY Change |
|---|---|---|---|---|---|---|---|---|
| Total Dispatches (000 tons) | 3,259 | 3,942 | 2,943 | 0% | -25% | 36,519 | 37,393 | 2% |
| Local Dispatches (000 tons) | 2,863 | 3,336 | 2,329 | -8% | -30% | 33,055 | 31,698 | -4% |
| North Local (000 tons) | 2,338 | 2,742 | 1,942 | -8% | -29% | 27,124 | 26,178 | -3% |
| South Local (000 tons) | 525 | 594 | 387 | -8% | -35% | 5,931 | 5,520 | -7% |
| Export Dispatches (000 tons) | 396 | 605 | 614 | 46% | 1% | 3,465 | 5,695 | 64% |
| North Export (000 tons) | 95 | 125 | 146 | 73% | 17% | 870 | 1,186 | 36% |
| South Export (000 tons) | 301 | 480 | 468 | 39% | -3% | 2,594 | 4,509 | 74% |
Impact of International Coal Prices
Despite the ongoing conflict in the Middle East, coal prices have remained stable. The primary impact has been on oil-related commodities, which have now returned to pre-conflict levels. If tensions escalate, there could be broader effects on commodity prices. For context, coal prices surged following the Russia-Ukraine conflict in February 2022, reaching an average of US$350 per ton in March 2022. Currently, prices are about 70% lower than those peaks.
Cost Dynamics and Profitability
The cost of Afghan, local, and international coal has been shifting. Afghan coal prices have decreased, with northern region players facing prices around Rs40,000-42,000 per ton. Local coal prices have also dropped, with costs between Rs32,000 and Rs33,000 per ton for northern participants. The decline in seaborne coal prices is positive for cement companies. Recently, cement prices in the northern region have increased to previous levels, which, combined with lower coal costs, is expected to boost profitability if demand rises in the coming months.
Positive Outlook for the Cement Sector
Despite challenges such as economic and political uncertainties, high inflation, and rising financing costs, the outlook for the cement sector remains positive. Cost efficiencies and an improved volume forecast for FY25 support this optimism. Potential increases in power and gas tariffs may pose challenges, but the sector is expected to remain resilient.
The KSE-100 index has gained 20% year-to-date in 2024, while the cement sector has grown by 11.5% in the same period. Pioneer Cement (PIOC) notably outperformed, driven by strong financial results and an unexpected interim dividend. Fauji Cement (FCCL) and Maple Leaf Cement (MLCF) are highlighted as top picks due to their well-timed expansions, positioning them to capture larger market shares as conditions improve.
| Metric | Feb-24 | Mar-24 | Apr-24 | YoY Change | MoM Change | 10MFY23 | 10MFY24 | YoY Change |
|---|---|---|---|---|---|---|---|---|
| Total Dispatches (000 tons) | 3,259 | 3,942 | 2,943 | 0% | -25% | 36,519 | 37,393 | 2% |
| Local Dispatches (000 tons) | 2,863 | 3,336 | 2,329 | -8% | -30% | 33,055 | 31,698 | -4% |
| North Local (000 tons) | 2,338 | 2,742 | 1,942 | -8% | -29% | 27,124 | 26,178 | -3% |
| South Local (000 tons) | 525 | 594 | 387 | -8% | -35% | 5,931 | 5,520 | -7% |
| Export Dispatches (000 tons) | 396 | 605 | 614 | 46% | 1% | 3,465 | 5,695 | 64% |
| North Export (000 tons) | 95 | 125 | 146 | 73% | 17% | 870 | 1,186 | 36% |
| South Export (000 tons) | 301 | 480 | 468 | 39% | -3% | 2,594 | 4,509 | 74% |
Disclaimer:
The information in this article is based on research by JS Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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