Provisional cement data for the month of Apr’19 displays an uptick of 5% MoM to 4.56mn tons (Mar’19: 4.34mn tons) given revival in North. While on a YoY basis, dispatches depict a growth of 8% led by an incline in domestic dispatches of 5% YoY to 3.98mn tons in Mar’19 and a massive 26% jump in exports to 0.59mn tons given increasing focus on low margin exports.
In particular, demand in North rebounded compared to prior months (total dispatches went up by 5% YoY / 10% MoM to 3.52mn tons).
Albeit, exports from North, although appearing significantly improved on a MoM basis (+82% MoM), succumbed to pressure amid tension with India and dumping of Irani cement in Afghanistan with offtake at 0.24mn (down by 2% YoY).
While South remained upbeat with growth in total dispatches at 17% YoY to 1.04mn tons (local went up by 5% YoY and exports climbed up by 56% YoY aided by sea-based exports).
With that said, cement sales in 10MFY19 settled at 39.14mn tons vis-à-vis 39.00mn tons in SPLY; local dispatches are set 33.42mn tons, depicting a slight decline of 5% YoY whilst exports remained strong at 5.72mn tons, escalating by 46% YoY.
Further dissection revealed that the South region continues to appear safer in comparison to North with total dispatches at 10.43mn tons (up by a solid 42% YoY) as both domestic as well as export offtake exhibited a jump of 14% (to 6.94mn tons) and 182% (to 3.49mn tons), respectively.
North market on the other hand underwent a dip of 9% YoY in 10MFY19 to 28.71mn tons with local offtake imitating the decline to 26.48mn tons while exports underwent a decline of 17% YoY to 2.23mn tons.
Cement players undergo growth barring LUCK
Major outperformers during Apr’19 included DGKC (0.640mn tons; +61.5% YoY) and CHCC (0.322mn tons; +50.1% YoY) on the back of new capacity additions whereas FECTO (0.074mn tons; -7.8% YoY) and MLCF (0.377mn tons; +13.4% YoY) were supported by robust exports. LUCK remained the only player to witness slowdown in Apr’19 (0.672mn tons; -10.9% YoY) with local offtake depicting weakness.
Whereas laggards that led the slowdown in 10MFY19 were FECTO (0.579mn tons; -19.6% YoY) and MLCF (2.650mn tons; -4.1% YoY) amid weakness in North whilst all others displayed growth. ACPL and DGKC remained outliers in 10MFY19 with dispatches at 2.782mn tons (+59.9% YoY) and 5.250mn tons (+40.7% YoY) owed to strong exports and new line of DGKC in South.
Soft coal prices to aid margins going forward
Recent fluctuations in cement prices signal at weakness in the market with domestic demand undergoing a period of consolidation amid economic slowdown, and over supply led by new capacities scheduled to commence commercial operations (MLCF, PIOC, LUCK and KOHC will online in CY19).
Exports too have come under pressure recently with India imposing a 200% dumping duty on Pakistan given tensions on the border. In the current scenario, soft coal prices appear to be the only silver lining.