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  1. #1
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    Cement despatches go up 14pc

    KARACHI: Despatches by the cement industry increased by 14 per cent or 2.261 million tonnes in the first five months of 2017-18 on a year-on-year basis.

    According to the All Pakistan Cement Manufacturers Association (APCMA), capacity utilisation remained 94.65pc during the five-month period.

    Although the increase recorded in domestic consumption in November was 10pc, sector-wide growth stood at 5.16pc because of a decline of 27.11pc in exports. In November, north-based mills sold around 3m tonnes locally, up 10pc from 2.69m tonnes a year ago. Local despatches in the southern region rose 8.4pc to 0.62m tonnes last month.

    However, exports from south-based mills took a hit as they went down 45pc to 0.07m tonnes in November on an annual basis. Exports from the northern region also decreased 8pc to 0.27m tonnes last month.

    Exports in the first five months of 2017-18 plunged 18.22pc to 2.08m tonnes.

    The APCMA spokesperson said the industry has so far withstood the impact of a fall in exports due to a robust growth in the domestic market. However, he feared that current political uncertainty may impact domestic growth as more capacities are expected to be commissioned in the next three years.

    All issues that the APCMA raised in the last few months have remain unaddressed, he said, adding that the hike in duties on coal has increased the cost of production.

    The increased consumption of cement does not mean that the government should feel free to impose duties on its input, he said. The government should also honour its commitment about withdrawing the excise duty in a phased manner, he added.

    The government can generate revenue by curbing under-invoicing and cement smuggling from Iran, the spokesperson noted.

    According to Topline Securities analyst Nabeel Khursheed, free-on-board coal futures price reached $94 per tonne while the average price in 2017-18 so far has been $89 per tonne.

    The reasons for a hike in international coal prices include China’s curb on domestic coal production as this source of fuel accounts for about 60pc of the country’s energy consumption. This led to an increase in its coal imports.

    In addition, the consolidation of a small number of coal mining companies that dominate the industry in Australia along with India’s ban on the use of petcoke in Uttar Pradesh, Haryana and Rajasthan in November also led to a hike in global coal prices.

    Quoting media sources, he said more than 70pc fuel requirement of Indian cement producers is met through petcoke. He said a further hike in coal prices could not be ruled out.

    https://www.dawn.com/news/1374944/ce...hes-go-up-14pc


    #Mein inko rolaonga

  2. #2
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    I cannot wrap my head around the fact that large-scale manufacturing, cement, steel, auto etc etc are growing at double digit rate. Heck even exports grew at double digit for the first four-five months of this fiscal year but still the macro-economic indicators keep plummeting. What is going on??


    Maybe some who are a lot more economically literate than me can elaborate @DW44


    #Mein inko rolaonga

  3. #3
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    Pakistan is investing in infrastructure with CPEC and other projects so the increased domestic consumption could be explained. The article mentions a drop in cement exports, can you link to articles mentioning a growth in exports?

    Also increased government spending can result in short term industrial spurts as seen here. the macroeconomic prospects are poor as this is based off debt at relatively higher rates and no clear design on how the government plans to generate revenue to pay it off (read no industrial and export policy) The Pakistani government has been facing balance of payment issues for more than a decade now iirc. This is one of my criticisms of CPEC, Pakistan cannot remain only an industrial corridor for China. The government needs to incentivise domestic manufacturing and exports, unfortunately that does not seem to be the governments priority

  4. #4
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    Quote Originally Posted by Syed1 View Post
    I cannot wrap my head around the fact that large-scale manufacturing, cement, steel, auto etc etc are growing at double digit rate. Heck even exports grew at double digit for the first four-five months of this fiscal year but still the macro-economic indicators keep plummeting. What is going on??


    Maybe some who are a lot more economically literate than me can elaborate @DW44
    This isn't the first time Pakistan has experienced such a dichotomy, the most recent example being the Musharraf era boom years from 2003 to 2006. What's happening is that the economic policies and fundamentals are as poor as they've always been so long term macroeconomic outlook remains poor. Much like 2003-06 though, which coincided with the peak of both aid flow from the US and a global economic boom, a large influx of capital into a relatively small economy has created artificial short term growth.

    In the current scenario, it's mostly to do with CPEC. If you look at the industries that are doing well, they are all feeder industries to the construction sector like cement and steel, automotive being an exception that I'll get to later. The massive influx of capital into an economy comparable in size to a medium sized Chinese city, mostly targeting the construction sector (roads, dams, ports etc.) has created demand for the products of industries that feed this particular sector. Much like the Musharraf boom though, this growth is unsustainable and will eventually return to a more modest pace.

    Long term, Pakistan's economic policies are still extremely hostile towards manufacturers and exporters, and not at all suitable for sustained growth a'la Korea or Taiwan. Some of it is political e.g. Ishaq Dar artificially inflating the exchange rate using borrowed money because in the eyes of our jahil public, a strong rupee is a good thing (strong good, weak bad) and the "stable" exchange rate would get them some votes. Other issues are structural, the most significant being the power crisis, which is relatively better now but nowhere near solved (and will crop up again as demand grows faster than supply), the unusually liberal import regime for a country this poor, and, the granddaddy of them all, the China FTA. All of these factors combine to ensure that Pakistani manufacturers don't have a snowball's chance in hell in the long run. Without manufacturing, a developing country has no way to move up the economic ladder significantly. A comparison of the Indian and Chinese economies is a good case study for why some countries develop and some don't despite impressive growth in short bursts.

    Automotive is an exception but it's a special case since it's starting from such a low base. Pakistan's auto market has been stuck at 150'000 to 180'000 units moved per year since 2007, compared to India's nearly 4.5 million units this year - 25 times the corresponding value for Pakistan despite India's population being just under 6 times Pakistan's and their development indicators being within margin of error range of ours so essentially the same. This is not so much a boom as a correction, as the market moves closer to where it should be.
    Last edited by DW44; 7th December 2017 at 15:43.


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