LAHORE - After the Iran and western countries nuclear deal, there are concerns that Iran may pose challenges for Pakistan cement manufacturers, considering Iran’s large production capacities and lower prices.
According to industry experts, though lifting of sanctions would enable Iranian cement players to export cement to Pakistan, it is believed that the 20 per cent custom duties and 17 percent GST would remove much of the price discount available on Iranian cement.
On exports front, domestic cement players might face competition in Afghanistan while Iran may also try to reach different regions to hunt higher margins.
However, experts do not see many concerns over the longer period as likely economic growth in Iran would lift country’s domestic cement demand. Further, any currency appreciation due to removal of sanctions could also deteriorate export competitiveness of the country.
Over the domestic side, expansion plans by DGKC and other players have also feared the investors over sustainability of pricing mechanism given increased supply in future. However, experts believe that risk of price war remains negligible as the rise in supply would adequately catered by the growing demand in the country.
Local cement demand is expected to remain sturdy during coming periods, where experts estimate local cement dispatches in FY16 and FY17 to grow at an average rate of 9% compared to 8% in FY15, considering higher govt development funds allocation and rising private construction activity in the country.