Cement demand to increase after reconstruction started in Pakistani flood-hit areas

22:01, August 18, 2010      

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Cement demand from Pakistani local markets may increase in current fiscal year in the wake of reconstruction activities in the flood-affected areas where basic infrastructure and hundreds of thousands houses were devastated by flash floods, analyst predicted on Wednesday.

Though the survey of the disaster by the recent continued floods has not been estimated, some investors held that after the floods, reconstruction activities could increase the cement demand from local market.

Furqan Punjani, a sector analyst, feared that the reconstruction would be prolonged due to the nature of the calamity.

"Once reconstruction activities start there would be a significant increase in the demand for cement and this is expected to work well for the cement companies and possibly government will have to ask for extra quantity," said Punjani.

On the other hand, he thinks that total cement sales in FY11 is also likely to remain flat at 34 million tonnes because it has been reported that the government may reduce development expenditures by 50 percent that could affect local cement demand.

Cement sales to get affected in first half of the current fiscal year, prices may go down Apart from lower cement demand during the abnormal rainy season as the recent floods have severely affected the roads and the distribution network.

According to industry sale figures, during the current month of August, cement dispatches have already declined by 30 percent while this trend is expected to continue in coming months.

Once reconstruction begins by the end of this calendar year, prices will be restored. Sales will recover in second half of 2011 (2HFY11) With the United Nations, World Bank and other donor agencies pledging for reconstruction activities, this will bring some relief to the sector in 2HFY11.

According to the World Bank initial estimates, agriculture, housing and infrastructure have witnessed the biggest blow, and until now more than 1 billion U.S. dollars (inclusive of 900 million U.S. dollars WB loan) have been pledged by different agencies.



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