Over the past four weeks, cement prices have gone up by Rs38, on average. In one of these weeks alone, between Jan 26, 2023 and Feb 2, 2023, Pakistan Bureau of Statistics’ data shows cement prices went up by Rs22—an average for some 17 markets across the country. In the Jul-Feb period for the current fiscal year, average prices went up 47 percent compared to the same period last year, where in some northern markets, price increase recorded has been even higher. The government’s supplementary finance bill is all set to raise FED on cement which will make the commodity even more expensive than today. Together with higher sales tax, the impact on prices could be as much as Rs40.
While cement offtake in the seven month period during the fiscal year has dropped considerably down 18 percent year on year, where domestic sales have dropped 14 percent and exports have plunged 46 percent, prices have seen mostly an upward trajectory, refusing to soften. Cement manufacturers are keeping prices elevated, perhaps at the cost of dispatches, but a decision that has mostly helped them keep revenue growth favorable, and shielded their margins from plummeting as both demand decline and cost inflation continue to cause distress.
Meanwhile, there is are no promises that cement manufacturers would not slowly raise prices even further—apart from the tax raises which will likely be passed onto the consumers—as their costs of production increase. Other construction materials will become more expensive too which could convert the current demand slowdown to snail speed. Though international coal prices have been coming down, restrictions on LCs may hinder cement manufacturers to shore up their inventories with coal from abroad.
Meanwhile, there is an added tax on local coal which is being used by domestic cement manufacturers that will impact their costs, necessitating a further price hike. But cement manufacturers will have to be very careful now about their pricing decisions.
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