Cement Industry Faces Mixed Challenges Amid Export Growth

The cement industry in Pakistan is currently facing a mix of challenges and opportunities. In October, cement dispatch numbers reached approximately 4.36 million tons, marking an increase of nearly 9 percent compared to the same month last year. This growth is largely attributed to exports, which have become a significant part of the industry. However, local dispatches have seen a decline, indicating that domestic demand remains weak. Over the first four months of the fiscal year 2025, total sales are down by 8 percent compared to the previous year, despite the positive trend in exports.

Interestingly, October's figures suggest a potential turning point. The sales recorded in this month surpassed the average monthly sales of both the first three months of FY25 and FY24. This indicates that while the overall situation is challenging, there may be signs of recovery on the horizon. The decline in dispatches for the last three months was significantly higher at 14 percent, which makes the October numbers even more noteworthy.

One of the key factors influencing the cement market is the macroeconomic environment. Recent improvements, such as decreasing inflation and a reduction in the Central Bank's policy rate to 15 percent, have created a more favorable backdrop for economic activity. The policy rate had peaked at 22 percent, and its decline is a positive sign for businesses and consumers alike. However, it is important to note that substantial growth in the cement sector will take time, as the economic slowdown has altered consumption patterns and delayed purchasing decisions for the past two years.

The construction industry, which heavily relies on cement, is at a standstill until both public and private sectors are willing to invest. The recovery of the real estate market is crucial, especially in the absence of a robust housing finance and mortgage market. Individual property owners, builders, developers, and real estate investors play a significant role in this recovery. Many in the middle class and even those in higher income brackets are hesitant to invest their savings in projects without clear returns or timelines.

During the tenure of former Prime Minister Imran Khan, there was a surge in momentum within the housing industry. However, that momentum has since faded, leaving consumers and investors waiting for the right moment to re-enter the market. Although inflation has decreased and construction materials are no longer as costly as before, the lingering effects of the increased cost of living continue to impact consumers' ability to make significant purchases.

On the government side, there is ongoing investment in infrastructure and development projects. New funding has been approved for long-term projects, many of which are still in progress. However, fiscal constraints and cost overruns have led to delays in project delivery. City residents can attest to the numerous road and transport infrastructure projects that were expected to be completed by now but are still struggling to reach their finish line.

While the increase in cement dispatches in October is a positive development, it is essential to recognize that this growth is primarily driven by exports. The domestic market remains sluggish, and a broader economic recovery is necessary for a more sustainable turnaround in the cement industry. As the government navigates its fiscal challenges, the hope is that a more stable economic environment will eventually lead to increased investment in construction and, consequently, a rise in demand for cement.