It’s not just textiles, folks. The cement industry is witnessing an impressive run in expanding its exports to markets near and far, thanks to a multitude of compounding factors including cheaper coal, falling import duties in nearby markets like Sri Lanka, and receptiveness in others for Pakistan-made cement. Not to mention, the excess cement that manufacturers have on inventory as domestic demand struggles to find impetus. Meanwhile, there are those companies—looking at you, DGKC—that are actively accessing new markets (such as the United States) by going through their long and arduous qualification processes. Altogether it’s working. In Sep-24, exports are close to a million tons, up 72 percent year on year. In 1QFY25, exports are up 22 percent year on year.
As a share of total cement sales, exports in Sep-24 took up 28 percent of the pie which is significant compared to the past several years (see illustration). In 1Q, the share stands at 21 percent which again is an improvement in recent years. While Sep-24 very well may be an outlier, in volumetric terms too, the peak has been set at close to a million tons and Sep-24 has set it.
DGKC plans to expand its reach to Europe by attaining the necessary certifications to qualify for various standards required in key countries such as Germany and France, while at the same time, setting up a subsidiary in the US. This preparation will reap fruit for DGKC no doubt in the time to come when domestic demand invariably leaves much to be desired. Macroeconomic stability in the country will remain precarious in the years to come, and maintaining a sales mix that is balanced and profitable must be a goal of cement companies as they look to the future. So far, exports have faltered in a highly competitive environment sensitive to commodity prices (such as coal), port costs and charges, fuel prices, and so on.
Domestic demand for cement is expected to remain dullard in the coming months, despite token developments taking place within the economic space. While major projects will eventually get restarted—cost overruns pulling new approvals—individual home buyers and households that were looking to construct their homes are contending with lighter wallets on account of higher taxes, and inflationary consumption. At the same time, investors too are selective about buying as the real estate sector becomes a graveyard for stalled projects. It is not uncommon for builders to halt construction if they are unable to sell off a major portion of the apartment complex or building to finance its construction. Meanwhile, those who bought off the units end up waiting long periods for the builder to deliver on his promise, their funds stuck with the builder and no recourse in sight. Home buyers therefore are cautious and bidding their time. As they should.
On the manufacturer’s side, since cement makers set their prices in the domestic market, they like to maintain a healthy share of local sales in the sales mix—that’s where the money is. But if local demand is nowhere to be found, manufacturers have to be able to export clinker, cement, or both to markets overseas and across borders, focusing on exploring newer markets. A recent trend suggests cement industry is making sure of that.