Flash Note: Pakistan Cement Sector - Dispatches from South Shine in an Otherwise Dull Environment
- As per the news citing All Pakistan Cement Manufacturers Association (APCMA), cement industry’s dispatches clocked in at 4.5mn tons for the month of Oct-18, up 8%YoY on the back of strong demand emanating from South (32 / 227% YoY jump in domestic sales / exports).
- Dissecting local dispatches in terms of regions exhibits North’s 2%YoY decline to 3.1mn tons. The reason for decline can be attributed to 1) curtailment of Public Spending Development Program (PSDP), 2) slowdown in the economy and 3) Southern players likely dispatching cement to Punjab.
- Local dispatches in South however showed the opposite trend and clocked in at 0.83 mn tons (up 32%YoY). Growth in cement offtakes in South started showing a rising trend post Jun-18 (after D. G. Khan Cement, DGKC’s plant in South came online) and average YoY growth rose to 27% during the first four months of FY19 vs. average of 6.6%YoY during Jan-Jun’18. We believe that Southern players are dispatching cement to the North due to 1) Tax Incentive (DGKC has 5 year Tax Holiday on its Plant in South) and 2) higher domestic retention price when compared to export retention price. Export prices from South are currently as low as USD32-35/ton (translating into ~PKR225/bag) compared to average domestic retention prices of PKR300-330/bag.
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