Though manufacturing is undoubtedly suppressed and demand is affected, monthly production of two key construction materials—steel billets and cement—are still coasting above the 5-year monthly production average (of the two materials). For cement, another metric is the average domestic dispatches for the 7 months of the fiscal year FY23—which is still higher than the average monthly domestic dispatches recorded during FY17 and FY19 (for the same period). Evidently, while demand has been weakening, it is nowhere near its lowest for construction materials yet.

Data from Pakistan Bureau of Statistics that captures long steel production through billets and ingots shows that production is down 9 percent in the cumulative Jul-Nov period (this is the latest data recorded by the LSM); while data reported by All Pakistan Cement Manufacturers’ Association shows domestic cement sales dropped 19 percent during this period. Odds are that production will plummet even further—perhaps farther below the 5-year average—as the country’s economic woes continue unabated and multiply.

Signs of depleting demand are already here. All demand factors are in disarray. Government development spending is down 44 percent in the first half of the fiscal year. Most projects that are underway are already funded. Private sector construction is also lacking in luster as cost overruns may be making many projects unviable. Cement and steel prices have had massive rallies over the past year or so, and they are still on an upward trajectory.

There was a little softening in prices in Nov-22 but Jan-23 came with a vengenace. Since Nov-21, cement prices have increased by 46 percent while prices for bricks and steel bars/sheets rose 14 percent, against a wholesale price index (WPI) increase of 29 percent. Unfortunately, the prices recorded by the PBS combine steel rebars and steel sheets under one heading when in fact, the two commodities are very different in terms of the type of steel and its usage. For instance, rebars are used in construction, and sheets are typically used in manufacturing of electronics and cars. The two types of steel belong to different markets and have different price and demand dynamics to boot. That also means that the price increase demonstrated by the index may not be the most accurate measure.

Lamentably, it is the only true measure there is to capture price changes. Nevertheless, steel bars and sheets reached their price peaks in Jul-22, improving slightly over the next few months, only to increase again in Jan of 2023. They are likely the most expensive they have ever been. The industry is one of several others suffering from LC restrictions and unable to secure their raw materials from abroad which has only further aggravated prices. The only awakening construction demand will have in the next few months would be of the rude kind.