Pakistan cement sales hit five-year October high

Total dispatches rise 0.4% year-on-year as domestic sales increase 1% to 4 million tonnes, while exports decline 4% to 0.8 million tonnes Pakistan's cement dispatches reached 4.8 million tonnes in October 2026, their highest level for the month in five years, recording a marginal increase of 0.4% year-on-year as higher domestic sales offset a decline in exports, according to a research report by AKD Securities. Domestic cement dispatches rose 1% year-on-year to 4 million tonnes, their highest level since June 2022, while exports fell 4% to 0.8 million tonnes. Recovering construction activity supported the increase in local sales, although annual growth remained modest because of the relatively high base in October 2025, when domestic dispatches rose 15% following post-flood reconstruction demand. On a month-on-month basis, total cement dispatches increased 4%, supported by a 7% rise in domestic sales, while exports declined 8%. Construction activity continued to recover from monsoon-related disruptions in August, with average daily domestic dispatches in northern Pakistan increasing to approximately 110,000 tonnes in October from 105,000 tonnes in September. Regional data showed that domestic cement dispatches in northern Pakistan remained unchanged year-on-year at 3.4 million tonnes, although they increased 7% compared with September. In southern Pakistan, domestic sales rose 7% year-on-year to 0.6 million tonnes, supported by construction activity in the region. On a monthly basis, southern domestic dispatches increased 3%. Export performance remained uneven across the two regions. Southern cement exports increased 12% year-on-year to approximately 0.8 million tonnes, supported by continued demand from overseas markets served through seaborne shipments. However, northern cement exports fell to zero from approximately 0.1 million tonnes in October 2025 because of the continued closure of the Pakistan-Afghanistan border. The absence of northern exports more than offset the increase in southern shipments, resulting in an overall 4% annual decline in cement exports. During the first four months of FY2026-27, total cement dispatches increased 3% year-on-year to 18 million tonnes, compared with the corresponding period of the previous fiscal year. Domestic dispatches increased 6% to 14.9 million tonnes during July-October 2026, while exports declined 10% to 3.1 million tonnes. Northern domestic dispatches rose 5% to 12.3 million tonnes during the four-month period, while southern domestic sales increased 11% to approximately 2.5 million tonnes. Southern cement exports increased 17% to 3.1 million tonnes during the period, while northern exports were eliminated by the Afghan border closure, compared with 0.8 million tonnes recorded during the first four months of FY2025-26. The decline in northern exports contributed to the overall reduction in overseas cement shipments despite growth in exports from the southern region. Industry-wide capacity utilisation stood at 67% in October 2026, broadly unchanged from the corresponding month last year. The utilisation rate increased by approximately 0.5 percentage points compared with September, when it stood at around 66%. Northern cement manufacturers operated at 60% capacity utilisation during October, a decline of 1.9 percentage points year-on-year, primarily because of the absence of exports. In contrast, southern manufacturers recorded capacity utilisation of 93%, an increase of 6.9 percentage points compared with October 2025, supported by higher domestic dispatches and export volumes. Southern manufacturers consequently operated substantially closer to their installed production capacity than their northern counterparts during the month. Alongside the recovery in domestic demand, cement manufacturers have increased selling prices to compensate for higher production costs. Average cement prices have increased by 12%, or Rs167 per bag, since the outbreak of the Middle East conflict. Higher selling prices have largely offset the impact of rising coal and fuel costs, helping the sector maintain its profitability. Cement manufacturers' gross margins reached 35.1% during the third quarter of 2026 despite elevated coal prices, while sector profitability increased 17% year-on-year. However, margins are expected to moderate slightly in subsequent quarters as existing inventories of cheaper coal are depleted and manufacturers begin using higher-cost supplies. Gross margins are nevertheless projected to remain broadly stable over the full year because of the industry's ability to pass increased costs on to customers through higher cement prices. Coal prices remain a significant risk to profitability. A coal price sensitivity analysis shows that higher international coal prices could materially affect earnings at individual cement manufacturers, although the extent of the impact varies across companies. For Lucky Cement, projected FY2026-27 earnings per share stand at Rs71.9 under a base coal price assumption of $85 per tonne. At coal prices of $100, $110 and $120 per tonne, the company's projected earnings per share would decline to Rs69.8, Rs68.3 and Rs66.9, respectively, representing reductions of 3%, 5% and 7% from the base case. DG Khan Cement faces a larger potential impact. Its projected earnings per share of Rs29.2 under the base scenario would decline to Rs24.8 at $100 per tonne, Rs22.3 at $110 and Rs19.7 at $120. These scenarios represent earnings reductions of 15%, 23.7% and 32.3%, respectively. Fauji Cement's projected earnings per share would decline from Rs7.7 under the base scenario to Rs6.1 if coal prices reached $120 per tonne, a reduction of 20.6%. Maple Leaf Cement Factory's projected earnings per share would decline from Rs12.2 to Rs9.4 under the same scenario, representing a reduction of 22.9%. For Cherat Cement, the corresponding reduction would be 19.2%, while Pioneer Cement and Kohat Cement would face projected earnings declines of 27.7% and 15.7%, respectively. Lucky Cement remains the least sensitive to higher coal prices among the companies covered in the analysis. Looking ahead, domestic cement dispatches are projected to increase approximately 8% year-on-year during FY2026-27. The projected growth is supported by expectations of cheaper financing under government schemes, improving income levels, favourable fiscal measures and the possibility of lower construction costs if tensions in the Middle East ease. However, a prolonged Middle East conflict and further increases in oil and coal prices could affect both cement demand and manufacturers' profit margins. The research report maintained an overweight investment stance on Pakistan's cement sector, citing recovering domestic demand, relatively stable gross margins and declining debt levels.