Pakistan exports cement to a number of neighbouring countries and territories further afield. In the 2010 and 2011 fiscal years, it exported mainly to Afghanistan to the north, a trend which is continuing in the current 2012 fiscal year. Pakistan also exports to Iraq, South Africa, Tanzania and Mozambique. Recent speculation about how the end of Saudi Arabia's cement import ban will influence Pakistan's exports are examined in this article, which also gives a summary of supply and demand in the region.
Introduction - 2010 and 2011
The recent turnaround in the profitability of Pakistan's cement production sector has been largely due to price-led growth in the domestic market, with little change due to exports. Indeed, Pakistan's exports dipped by 3.5% in the first seven months of the current fiscal year (which will end on 30 June 2012). Exports were down by 19.5% year-on-year through sea ports, with a lowering of demand in the Middle East to blame.
In the 2011 fiscal year there was a shift away from exports by sea, as demonstrated by the dramatic decline in exports to countries in the east of Africa relative to the 2010 fiscal year. This can be seen in Table 1.
An increase in exports to Afghanistan and Iraq has benefitted producers in the north of Pakistan, which had been suffering from significant overcapacity. Indeed, demand in Afghanistan is now so high that export cement prices from Pakistan have risen by approximately 30% since the end of 2011.
|Country||July - Nov 2011 (Millions of US$)||July - Nov 2010 (Millions of US$)||Year-on-year change (%)|
Table 1: Value of cement exported to various nations by Pakistan in the first five months of the 2011 and 2012 fiscal years.
Middle East glut cuts export potential
IGI Securities is of the opinion that the prospects for increased cement exports to the Middle East will not improve in the next two years due to a supply glut in the Middle Eastern cement markets. We anticipate a decline in exports of around 5% to 9Mt in the entire 2012 fiscal year.
Additionally, there has been much speculation recently in Pakistan about the removal of Saudi Arabia's cement import ban and how this will benefit Pakistan's exports. However, IGI Securities is of the opinion that Pakistan will not be able to plug Saudi Arabia's supply gap. Instead it is likely that the neighbouring UAE and Turkey, which have an estimated 50Mt/yr of excess cement capacity between them will benefit.
While demand picked up in the fourth quarter of 2011 in the UAE, this is not believed to be enough to absorb the Emirates' overcapacity, installed in 2009, which could easily supply the 4-5Mt/yr defecit in Saudi Arabia. In any case, it is likely that increasing diesel costs already render Pakistan's cement an unattractive prospect for the Saudi Arabian market.
|2010 (Actual)||2011 (Estimate)||2012 (Forecast)|
|Consumption (Mt)||Production (Mt)||Consumption (Mt)||Production (Mt)||Consumption (Mt)||Production (Mt)|
|United Arab Emirates||12||17||13||19.5||15||38.3|
Table 2: Cement consumption and production (Mt) for 2010 - 2012 in various Middle Eastern states. With such high overcapacity in the UAE, Pakistan will not realistically supply the recently-opened Saudi Arabian market.