Local Cement Sales Plummet 27.54% in August

Cement Sales Plummet by 27.54% in August Due to Tax Increases and Monsoon Slowdown

The local cement industry experienced a sharp decline in sales in August 2024, with local cement sales plunging by 27.54% year-on-year to 2.752 million tonnes. The decrease was driven by a combination of tax-driven price increases and a slowdown in construction activities during the monsoon season.

According to the All Pakistan Cement Manufacturers Association (APCMA), cement exports also saw a significant reduction, falling 16% to 613,857 tonnes compared to 730,755 tonnes in August 2023. As a result, the overall cement dispatches (including local sales and exports) tumbled by 26% to 3.366 million tonnes from 4.528 million tonnes in the same month last year.

Year-to-Date Performance

During the first two months of FY25 (July-August), total cement dispatches were 6.375 million tonnes, marking an 18% decrease from 7.758 million tonnes during the same period in the previous fiscal year. Domestic shipments during this period fell by 21% to 5.214 million tonnes from 6.578 million tonnes last year. Export dispatches also decreased by 1.65%, with volumes dropping to 1.161 million tonnes compared to 1.181 million tonnes in July-August FY24.

Impact of Taxes and Economic Uncertainty

An APCMA spokesman highlighted the continuous negative trend in domestic demand over the last 12 months, attributing it to higher taxes and economic uncertainty. The current budget’s Federal Excise Duty (FED) on cement has been doubled, coupled with significant increases in other federal and provincial taxes. The spokesman urged the government to reconsider these taxation measures, emphasizing that the construction sector’s decline is reducing employment opportunities for both skilled and unskilled labor, exacerbating the already struggling economy.

Analysis and Outlook

Nasheed Malik of Topline Securities noted that the decline in sales during August was primarily due to a slowdown in construction activities, driven by higher input costs and significant year-on-year increases in cement bag prices—29% in the North and 19% in the South.

He also mentioned that Punjab-based players secured stay orders from courts regarding increased royalty per bag. Despite this, due to the provision of bank guarantees, cement bag prices increased by Rs65-75 in the middle of the month.

In August, total cement capacity utilization was estimated at 47%, slightly up from 44% in July but significantly lower than the 66% utilization recorded in August 2023. The average retail price of cement increased by 1% in the North, while prices remained almost unchanged in the South, according to the Pakistan Bureau of Statistics data.