For months—and long before this fiscal year began—cement prices have soared without showing any signs of weakness or suggesting any price wars forthcoming. Blame it on the economy. Inflation, rising cost of goods, numbingly high cost of borrowing, fuel prices, rupee depreciation—despite sluggish demand, capacity utilization plunging; prices kept seeing north (see graph in this story: “Cement: Coal shoulder”). In fact, four months into the fiscal year (FY24), the average price for the period Jul-Oct had risen 13 percent compared to the same period last year. In November, prices began to weaken; only to close the month off with a nice little bump of Rs33 within the span of a week.

But this is the average for all markets reported by the Pakistan Bureau of Statistics (PBS). In certain markets, the increase is higher—in Islamabad, prices went up by Rs78, in Multan by Rs79 and in Lahore by Rs60. The sudden jump in price comes after the months long tussle between transporters on the implementation of the axle-load regime which would put limits on the weight of trucks permitted to move on Pakistan’s motorways and highways. Once implemented, naturally, transport costs were to go up. Cement prices as a consequence have surged.

For cement manufacturers though, this may not be a major demand dampener as one might think. After all, since July, cement off take has been slowly growing—both in the local markets and to exports. Between Jul-Oct-23 (and 4MFY24), cumulative off take was up 14 percent year on year—granted from a low base. On a monthly basis, capacity utilization has improved substantially since July. In 4M, capacity utilization for the industry stands at roughly 58 percent. There are still large capacities laying idle, as capacities have increased much over the years, but manufacturers are being proactive—some tapping into new export markets, others hoping to. Most manufacturers are relying less heavily on the grid for their energy requirements which is trimming on their costs, whilst maintaining a healthy mix of coal supplies from multiple sources to achieve cost optimization.

This is not to say that demand will not continue to play hot and cold as inflation bites. Only that the burden on the end-consumer given existing price trends is already significantly steep and only those constructions are moving forward that can absorb the costs and then some.