Pakistani cement prices have reached a five-year low while the industry’s capacity continues to expand. However, despite the decline in capacity utilization, there are no signs of a significant price drop, defying the usual trend.
According to reports, the industrial capacity utilization in the cement sector stands at approximately 58 percent, with a drastic decrease to less than 50 percent recorded in April. Surprisingly, manufacturers have expressed reluctance to engage in large-scale price wars, indicating that prices are unlikely to fall substantially.
The cost of cement has seen a consistent upward trajectory, with an average increase of 43 percent across various marketplaces from July to May. This upward trend has been observed throughout the current fiscal year, with notable spikes coinciding with the rising inflation of consumer goods and production costs.
It is worth noting that the upward price movement of cement has influenced the prices of other building materials, particularly steel. This synchronized price growth across the construction sector is a well-calculated strategy that has so far favored cement manufacturers.
Over a span of ten months, domestic cement dispatches have witnessed a significant decline of 18 percent, while domestic offtake has fallen by 16 percent. Furthermore, the export figures have been even more discouraging, with a substantial drop of 29 percent.
Despite the decrease in demand and lower capacity utilization, cement prices have remained stable, challenging the expectations of market observers. The industry’s resilience in maintaining prices at a higher level indicates a cautious approach from cement manufacturers, potentially aiming to maximize profitability amidst challenging market conditions.
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