Islamabad, After two months of subdued activity due to seasonal conditions, the cement industry in Pakistan reported a rebound in dispatches in March 2024. Total dispatches for the month reached 3.94 million tons, marking a 4% increase year-over-year and a significant 21% increase from the previous month.

According to JS Global, the improvement in dispatches comes as the industry recovers from the impacts of winter and fog, which had previously restricted construction activity across the country. For the first nine months of the fiscal year 2024, total dispatches amounted to 34.5 million tons, showing a 3% increase from the same period last year. The analysis notes that while the ongoing conflict between Israel and Iran has not yet impacted coal prices significantly, any escalation could affect commodity prices across the board, similar to the surge seen in March 2022 following tensions between Russia and Ukraine.

In terms of cost dynamics, the landed cost of Richard Bay coal remains lower than the combination of Afghan and local coal used by cement manufacturers last quarter, maintaining its relevance in the coal blend for many producers. Prices for Afghan coal have dropped to around Rs42,000 per ton, and local coal prices are also down, with most northern cement manufacturers facing costs between Rs32,000 to Rs33,000 per ton.

Despite the year-to-date underperformance of the cement sector on the Karachi Stock Exchange, with only a 3% gain compared to the overall index's 13% rise, JS Global maintains an overweight stance on the sector. This optimism is based on potential margin improvements and volume increases as the new government stabilizes politically. Notable mentions in the report include Pioneer Cement, which significantly outperformed with a 7% gain and a Rs5 per share dividend, and other top picks like FCCL and MLCF, which are well-positioned for market share gains with timely expansions.