After posting healthy dispatches of three million tons plus in previous four months, the new fiscal year started on a sour note for the cement sector as it struggled to stay afloat amid political uncertainty, unkind government policies in domestic markets and lowering demand in its export markets.
Cement dispatches to domestic markets during the month of July 14 were 1.73 million tons compared with 1.85 million tons during same month last year showing a decline of 6.52 per cent. Exports during July 14 were 503,000 tons against 749,000 tons during July 13 showing reduction of 32.89 per cent. Total dispatches during July 14 were only 2.23 million tons compared to 2.6 million tons during same month last year showing a decline 14.12 per cent.
The worse export performance was mainly attributed to reduction in quantities to Afghanistan where against exports of 441,812 tons in July last year, the exports reduced to 183,927 tons in July this year. According to industry experts this trend is likely to continue in coming months as NATO forces prepare to leave Afghanistan. The massive decline of over 58 per cent in exports to Afghanistan according to industry experts also indicate declining competitiveness of the commodity in the global market where other regional players like Iran are making inroads. The duty on imported coal had further put pressure on cost of business after massive hikes in power and energy tariffs, they added.
The cement plants located in south showed better performance in exports as the exports from south mainly through sea suffered a loss of only 7.2 per cent while the exports from north declined by massive 43.8 per cent. However, in the domestic market the decline in cement uptake from north was restricted to 5.9 per cent against a decline of 9.1 per cent in the South. This, according to experts, depicts slow down in construction activities partly due to monsoon and partly to uncertain political climate.
A spokesman of the Pakistan Cement Manufacturers Association pointed out that the issues impacting cement sector have still not been addressed by the government. In federal budget 13-14, cement was brought within the purview of ‘third schedule’ of Sales Tax Act 1990 that increased the overall tax burden and resulted in increase in the local prices. Considering the cement dynamics, industry on numerous instances has approached the government to reconsider its decision and remove cement from third schedule and to bring it in the normal sales tax regime.