Latest reports suggest cement prices across markets have surged by Rs20-30 per bag. This is despite no visible thrust in demand. In 10MFY24, total cement offtake rose only 2.5 percent, primarily due to a 65 percent growth in exports; the latter now contributing 15 percent to the sales mix versus’ last year’s 9 percent. Domestic cement sales had slid 4 percent during this period compared to last year’s already low base. Prices should be declining more, not less, right?

Perhaps. Prices for various markets had begun to show weakness in Mar-24, slowly declining every week without fail. Since its peak of Rs1244 per bag (average price for Pakistan. Other markets saw rates fluctuate in the same pattern but recorded different peaks), the price of a cement bag had dropped to Rs1204 in the second week of May. In the most recent recorded figure, a cement bag—on average—would cost Rs1210 to consumers. At the time, falling price begged the question whether the descent would continue as weeks pass by. Prices had formed a rare resistance against dwindling demand and its future outlook continuously growing since FY21.

Indeed, during the current fiscal year, every day, about 10,580 tons of cement is sold in the country according to the monthly numbers reported by the industry association. This is lower than every year since FY17. Demand is lower than at least 6 years. For the sake of consistency, we have taken monthly numbers for domestic sales for each year in the period 10M and divided that by 300 (assuming 300 working days in a year). This indicates the depth of the decline, not entirely. In fact, this would be doubly troubling considering capacities are much higher this year than two years ago, and much higher compared to six years ago. When prices began to decline in Mar-24, it was assumed that companies were once again competing on prices to sell off as much excess cement as they could. But April and May’s boost in exports would suggest companies are dispatching more abroad than before which is keeping total sales at a “comfortable” growth level. The only way companies make decent money at this point would be to keep prices stable, looking up, which would be the policy if exports keep growing.

A stronger alliance amongst companies on price stability may benefit, more than it would hurt.