Exports are proving to be Achilles heel for the cement sector that has seen its growth inhibited by regular decline in exports despite very healthy growth in domestic cement consumption.
Cement industry despatched a record 33.88 million tons of cement during the first ten months of the ongoing fiscal year. The domestic consumption was 29.871 million tons while the exports were only 4.01 million tons.
During the same period of last year cement despatched was 31.901 million tons out of which the domestic consumption was 26.973 million tons and exports were 4.928 million tons.
During the July-April 2017 period the domestic consumption of cement surged by 10.74 percent while the exports declined by 18.63 percent. Because of this massive decline in exports the growth in cement despatches increased by only 6.21 percent.
Meanwhile data released by APCMA shows that in the month of April the cement units despatched 3.576 million tons, out of which 2.734 million tons cement was despatched in the Northern part of the country and 0.586 million tons was despatched in the Southern part of the country.
During the month of April 2017, capacity utilization of the industry remaind 92 percent. During April 2017 the domestic consumption of cement surged by 9.53 percent while the exports declined by 50.75 percent.
There is more than 50 percent decline in exports in the month of April. The exports from mills based in north were 181,911 tons and from mills based in south was 0.074 million tons only. Total export of cement to Afghanistan in the month of April 2017 was 0.045 million tons whereas export to India and other countries was 0.131 and 0.081 million tons respectively.
A spokesman of All Pakistan Cement Manufacturers Association said the buoyancy in the domestic market is a good omen for the cement industry. However, he said, it is not prudent to ignore the sharp decline in exports. He said exports at one time peaked above 10 million tons which has progressively declined to almost half.
He said the industry is operating on excess capacity and is regularly adding new units to keep abreast with the expected increase in construction activities. Naturally, he added, the cement manufacturers are more interested in catering to the domestic market but they have to dispose of excess capacities through exports. If exports continued to decline new capacity additions in the sector would stop.
He said the planners have been informed about the impediments in exports and right steps, if taken in this regard, could revive exports which are a cushion for the sector in rainy days.
Spokesman of APCMA said that Clinker and Cement are being manufactured locally and is abundantly available in Pakistan. It is surprising to note that the list of locally manufactured goods as notified by the Federal Board of Revenue vide Custom General Order no. 11 of 2007 dated August 28, 2007, does not include cement. Secondly, the import of clinker and cement is liable to 11% and 21% of custom duty and due to cheap energy cost in neighboring countries; low-grade quality cement is being dumped in the Pakistani market.
It is urged to increase the customs duty on import of clinker from 10% to 20% in order to support the local manufacturers and imports of cement should not be allowed until exporter have registered themselves with Pakistan Standards and Quality Control Authority (PSQCA) and PSQCA certified the quality of cement just as is being done by India and all other importing countries.