Why Cement Companies Are Up 7.5% Today?

Cement companies are making headlines today with a few experiencing a significant surge of 7.5%. But what’s driving this upward momentum? Let’s break down the latest data released by the All Pakistan Cement Manufacturers Association (APCMA) to understand why.

Strong Offtake in March 2024

The APCMA’s recent report on cement offtake for March 2024 reveals some promising figures. Total dispatches have seen a remarkable increase, surging by 21% compared to the previous month and 4% compared to the same period last year. This surge in demand has led to a jump in capacity utilization, reaching 57%.

Rise in Local Sales

One of the primary drivers behind the surge in cement demand is the increase in local sales. In March 2024, local sales witnessed a significant uptick of 17% compared to the previous month. This increase can be attributed to the rising demand stemming from increased construction activities post-election. However, on a year-on-year basis, local sales remained flat due to reduced work time during Ramadan.

Boost in Export Dispatches

Export dispatches have also seen a notable rise, increasing by 53%. Southern players are focusing on exports to the USA, Canada, and European countries, while northern players are targeting the Afghanistan region. This increase in exports has contributed to the overall growth in the cement industry.

Cumulative Growth and Challenges

On a cumulative basis, the industry has witnessed a 3% increase in cement dispatches for the fiscal year 2024, compared to the same period last year. However, export numbers have declined by 4% due to supply constraints arising from the Red Sea Conflict. Despite the overall growth, challenges such as supply constraints and inflated construction costs persist, affecting the industry’s performance.

Outlook for the Future

Looking ahead, there is a positive outlook for cement sales in the fiscal year 2024. Analysts expect a 5% increase in demand, driven by optimism regarding domestic demand. Accelerated construction activity post-Ramadan, anticipation of a new government housing scheme, and potential declines in interest rates are expected to fuel this demand. However, challenges such as inflated construction costs, including cement and steel prices, remain a concern and could dampen demand.

In conclusion, the surge in cement companies’ stock prices today is reflective of the promising growth prospects for the industry. Despite challenges, the cement sector in Pakistan remains resilient, driven by both domestic and international demand factors.