Pakistan Sees Sharp Increase in Cement Prices Following Budget

Pakistan Sees Sharp Increase in Cement Prices Following New Budget

Islamabad: After a period of stability around PKR 1200, cement prices have recently adjusted, now averaging PKR 1409 per bag, as reported in a news article on July 10.

The costs differ depending on where you are in Pakistan; Islamabad is PKR 1458, Lahore is PKR 1500, Sargodha is PKR 1460, and Peshawar is PKR 1500. These changes follow the new Budget and an increase in the Federal Excise Duty (FED) on cement. The new fiscal measures have significantly impacted the pricing structure within the cement industry, leading to a noticeable increase affecting suppliers and consumers across various regions.

Since December 2023, when the price was PKR 1244 per bag, PKR 169 per bag has increased, primarily in the past week. These adjustments may impact smaller projects and budgets, potentially leading to a slowdown in smaller construction initiatives. Domestic cement offtake in FY’24 was down 5% compared to FY’23 and 20% compared to FY’22, totaling 38 million tons, the lowest in seven years. This decline in offtake indicates a challenging market environment, with reduced demand adding pressure on manufacturers to balance supply and profitability.

Cement producers have maintained profitability by managing costs, investing in energy-efficient technology, and focusing on exports. These strategic moves have helped companies mitigate the impact of fluctuating domestic demand. Exports rose by 35% from FY22 and 56% from FY23 in FY’24, making up 16% of the sales mix and paying for fixed expenditures. The increase in export activities highlights the industry’s adaptability and efforts to seek growth opportunities beyond domestic borders.

For end users, the adjustment in cement prices reflects broader trends in construction costs, including materials, labor, and transportation. As the cost of raw materials and logistics continues to rise, the construction sector faces increasing challenges in managing project budgets. FY’25 is expected to see similar challenges as FY’24, with ongoing price pressures and economic factors influencing the overall market dynamics.

However, cement manufacturers have shown resilience, with post-tax combined earnings growing by 17% in the first nine months of FY’24, indicating a stable outlook for the industry into June 2025. This growth in earnings demonstrates the sector’s ability to navigate financial pressures and maintain profitability through strategic planning and operational efficiency. As the industry progresses, stakeholders must closely monitor market trends and policy changes to adapt effectively to the evolving economic landscape.

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