Despite the Pakistani cement industry facing a significant decline to a five-year low and witnessing an increase in capacities, there are no indications that prices will experience a major decrease, as is typically expected when capacity utilization declines. As of the first nine months (9M), the industry’s capacity utilization stands at approximately 58% overall, but in April, it dropped to below 50%. However, manufacturers have assured that they will not engage in any significant price wars. It appears that whatever demand exists in the market will be met at the current prices, without any substantial softening in the foreseeable future.
On average, cement prices have risen by 43% across various markets from July to May. Prices have consistently increased since last year, with occasional sharp spikes throughout the current fiscal year, driven by inflation in the cost of production and other consumption goods. Cement prices have moved in sync with the prices of most building materials, particularly steel. This strategy has been carefully planned and has worked in favor of cement manufacturers. Even if cement prices were to drop and trigger a price war, it is unlikely to stimulate greater spending on development or construction, considering the continued high cost of other materials such as steel. The demand dynamics for cement and other construction materials remain unchanged, and there are no new avenues for demand opening up. Development and public spending are not expected to recover until the ongoing economic crisis emerges from its deep slump.
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