Pakistan cement utilisation slumps to decade low

Pakistan: The capacity utilisation of the cement sector in Pakistan has reached its lowest point in the last decade. Capacity utilisation sank to 70% in the first half of the fiscal year, which ended on 31 December 2011 for the current fiscal year. Meanwhile exports have continued to decline, offsetting the gains in local consumption.

"The expected turn around in the economy did not materialise as the capacities of the sector continued increasing," said a spokesman of the All Pakistan Cement Manufacturers' Association (APCMA). He said that expansions in the cement sector were planned six years ago when the economy was far stronger. The prolonged recession of recent years and drying up of government development programmes had disrupted the viability of the cement sector.

The APCMA spokesman added that domestic demand in December 2011 was encouraging, showing a growth of over 13% compared to December 2010. This compensated to some extent the 5% decline in local demand in November 2011. However exports remained under pressure during the six months to December 2011, posting a decline in four of the last six months. Exports declined by over 8% in December 2011. The overall decline in exports stood at 5% during the July - December 2011 period.

Total cement output in the country for the first two quarters of the fiscal year reached 15.40Mt, which was 4% higher than the 14.78Mt seen during the corresponding period of 2010. The majority of the capacity is located in the northern part of the country, where the industry posted a modest gain of 6% in domestic market and a lower increase of 3% in exports.

The spokesman for APCMA also pointed out that most of its member companies had been incurring huge losses after substantial increases in the cost of production. Input prices, especially coal, furnace oil, diesel, electricity have significantly increased in recent months forcing up the cost of production for cement producers.