KARACHI: The situation of submitting a Computerised National Id Card (CNIC) copy on the acquisition of products price greater than Rs50,000 has led to a big decline in cement gross sales.
“Owing to the CNIC situation, cement gross sales have plunged virtually 60-70% as a result of majority of the cement sellers are unregistered,” mentioned Sherman Securities’ cement sector analyst Saqib Hussain. “Cement demand in Pakistan, which stood at 150,000 tons per day earlier, has now dropped to 40,000 to 50,000 tons.”
The analyst added that 60-70% of cement gross sales in Pakistan have been made by unregistered sellers, who weren’t keen to abide by the brand new rule of the Federal Board of Income (FBR).
The cement market of the nation is already witnessing a value struggle after a cartel of corporations broke up.
Other than this, he added, rising inflation and depreciation of the rupee in opposition to the US greenback coupled with a number of hikes in rate of interest hit the cement sector laborious and enhanced its value of manufacturing manifold, mentioned Hussain.
“The cartel was damaged when new capability expansions began about two years in the past,” mentioned the analyst. “The sector’s manufacturing capability has gone up by 7.5-Eight million tons previously two years.”
In response to the All Pakistan Cement Producers Affiliation (Apcma), the nation has the potential to supply 57 million tons of cement per yr.
“With the inception of recent crops, each firm determines its personal costs, therefore, there’s a lack of consensus on pricing,” mentioned JS Analysis Company Head Atif Zafar.
Costs within the southern area has dropped and are within the vary of Rs650 to Rs700 per 50kg bag whereas within the north, cement is being offered between Rs500 and Rs550 per bag.
Lately, Energy Cement closed its outdated plant, which had manufacturing capability of three,150 tons per day.
“The plant was outdated and timeworn. Such crops are not environment friendly when it comes to value and tax credit score,” mentioned Zafar. “When demand just isn’t sufficient, the businesses determine to not proceed working outdated crops.”
The federal government has given tax advantages on the introduction of recent know-how in cement crops, he added.
“At current, the rate of interest in Pakistan is so excessive that nobody is contemplating beginning a brand new enterprise,” Zafar mentioned.
General, the financial slowdown, mirrored in a nine-year low financial development fee of three.three% in FY19, has induced a pointy fall in cement demand.
Then again, the federal government additionally slashed Public Sector Improvement Programme (PSDP) spending.
Within the southern area, cement demand primarily comes from government-funded initiatives, which have diminished in quantity as a result of austerity measures taken by Prime Minister Imran Khan.
“Within the north, demand stems from the non-public sector, which is now reluctant to embark on any new enterprise as the federal government has began questioning sources of earnings,” Zafar mentioned.
“Due to this fact, when it comes to quantity, gross sales are down and costs have additionally fallen because of an absence of consensus inside the trade over pricing,” mentioned the analyst.