The cement industry is being affected badly in Pakistan due to different reasons. Continuous increase in coal prices globally has made a bad impact on the cement industry which is already under severe pressure to stay afloat amid rising input cost. However, experts have predicted that the local demand for cement to remain strong for FY22 as economic activity continues to pick up where private sector is expected to provide the major support to demand. However, exports are expected to take a hit in near term particularly as cost of manufacturing continues to increase courtesy coal prices.
Different factors denting the manufacturing of cement include high coal and electricity prices. US dollar also played its role and increased to Rs172 which has increased the overall fuel cost by almost 100 percent. The continuous increase in the prices of petroleum products has also increased the transportation, logistic costs. The production also gets affected due to inactive large construction projects due to unavailability of funding. Work is in progress on mega dam projects like Bhasha and Mohmand Dam that can boost the manufacturing of cement in the country, but their progress is slow. Cement sector has been using coal as fuel for manufacturing of clinker since 2004, which it imports from South Africa, Mozambique, Australia and Indonesia, as availability of local coal to meet the requirement of the sector is not sustainable due to lack of infrastructure and inferior quality.
Cement is an essential material for the construction industry and a key contributor to the economy of Pakistan. For cement manufacturers, coal is not only an essential fuel source but the largest cost component in the manufacturing process besides electricity. Therefore, the government needs to come forward and facilitate the industry by providing low-cost coal and slashing taxes on electricity provided to the cement industry.