Latest recorded offtake for May 24 shows a marked improvement in dispatches, and not just that in the exports category, though exports have certain pushed the curve. Specifically, total cement sales in May 24 rose 45 percent month-on-month, as exports grew 50 percent and domestic offtake surged 44 percent. Given that Apr-24 was not a great month for the industry—in fact, sales were at their 20-month lowest—May 24 could mean one of two things: just a seasonal bump pre-budget (where FED may be raised on cement) or a serious recovery in demand.

Just one month of strong sales cannot carry the poor performance of an entire year and for that reason alone, the second one is out. In 11MFY24, total offtake is up 3 percent; with exports growing 66 percent year on year, and domestic offtake actually declining—by 4 percent. To that end, exports are contributing almost 16 percent to the sales mix as compared to last year’s 10 percent (in May-24, exports were 22 percent of the entire offtake during the month). But last year, the cement industry did not exactly perform tremendously well. In fact, sales in FY23 were significantly down compared to the year prior. Compared to last year’s low base, numbers during FY24 should ring some warning bells.

High inflation in general and for construction materials in particular have caused cost overruns amid cuts in development expenditure, project delays as a consequence and substantially subdued purchasing power have all incapacitated demand to the extent that more than a third of the current capacity is laying idle. This is also amid mounting capacities which have nearly doubled in the past few years in anticipation of growing demand. Next year, perhaps, demand will grow enough to absorb the additional capacities, but in FY24, the industry will have to make do.

Though exports provide a much-needed breather, it is domestic demand that the industry fundamentally depends on. With pricing power in the domestic market comes the dependence on local demand to make money where exports merely fill the gaps to cover fixed costs. At times of peak domestic demand, the share of exports visibly falls. Some cement manufacturers though have had the foresight to create linkages in attractive export destinations and found a small footing. This will always help when domestic demand screeches to a halt, which it often does given how frequently the Pakistani economy goes through its boom/bust cycles.