Weak cement dispatches continue in December 2010

Cements Dispatches remain depressed in December: Cement industry dispatches declined by 7% YoY to 2.49mn tons during Dec-10, due to 5% YoY reduction in local dispatches and 11% YoY shrinkage in exports. On MoM basis, both local and export dispatches showed improvement – each rising by 3%.

2QFY11 shows improvement over 1QFY11: Local dispatches for 2QFY11 improved by a significant 19% on QoQ basis mainly because of low base effect (1QFY11 volumes were depressed due to floods). 2QFY11 local dispatches were still down 0.4% YoY, indicating that recovery is still lackluster. Exports were up a meager 2% QoQ to 2.33mn tons during 2QFY11.

Afghanistan strong; through-port exports continue to show weakness: Exports to Afghanistan, now comprising 52% of total exports, rose by 52% YoY / 5% MoM to 373k tons in Dec-10. Through port exports remained weak during Dec-10, with dispatches down 38% YoY.

Coal prices continue to rise – margins to feel the pinch: International coal prices have risen by 35% since start of 2QFY11, currently trading at USD128/ton (FOB), while cement prices have only risen by 2%. Margins for 3QFY11 could, therefore, shrink by 20-25% incase coal / cement prices maintain current level.

Cement Dispatches remain depressed in December

Cement dispatches fell by 7% YoY to 2.49mn tons during Dec-10 as export dispatches fell by 11% YoY, while local dispatches declined by 7% YoY. 1HFY11 cement dispatches, were down by 11% YoY as local cement dispatches declined by 8% and exports plunged by substantial 17% YoY.  2QFY11 has shown some recovery over 1QFY11, with local dispatches up 19%, QoQ (mainly because of low base effect as 1QFY11 sales were depressed due to floods, down 16% YoY) while exports rose a meager 2% QoQ.

Afghanistan strong; through port exports continue to show weakness

Exports to Afghanistan reached 373k tons in December, an increase of 52% YoY / 5% MoM. Strong Afghanistan demand (up 23% YoY during 1HFY11) has been a much needed support for the Northern players, which have effectively become in competitive in “through-port” exports due to high inland freight cost. Exports through sea were down by 38% YoY in Dec-10 (1HFY11 through port exports down 37% YoY) mainly because of newly commenced regional capacities along with weaker demand.

Coal prices continue to rise – margins to feel the pinch

Coal prices in the international market have risen by 35% since start of 1QFY11, while cement prices have only increased by 2%. With Coal currently trading at USD128/ton, EBITDA/ton could shrink by 20-25% in 3QFY11 assuming cement / coal prices maintain their current levels.

Economic & Political News

Nine-point agenda to government: say ‘yes’ or ‘no’ in three days, says Nawaz

Pakistan Muslim League-Nawaz (PML-N) gave a three-day deadline to Prime Minister Syed Yousuf Raza Gilani to accept or reject for implementation his nine-point agenda formulated by PML-N Central Organising Committee (COC). Now the deadline will start after official mourning of death of Governor Punjab. The agenda mainly comprised: immediate withdrawal of increase in petroleum products prices, removal of ‘corrupt’ ministers and replacement of these with noble and qualified persons, a 30% cut in government expenditures, implementation of Supreme Court’s decision on National Reconciliation Ordinance (NRO), re-organisation of Election Commission, a significant cut in the size of the federal cabinet, bringing all those to justice involved in the scams of Hajj, Steel Mills, NICL, sugar, setting up of an independent accountability system, return of written-off loans worth billions of rupees, relief to masses in the overall price hike and clear and concerted steps aimed at ensuring Pakistan’s sovereignty.
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