20-06-2025
- Business
- Business Recorder
Cement price dynamics
Cement prices have been on a whirlwind and consumers should get used to it, if they haven't already. Once again after weeks of staying between Rs1400 and Rs1450, prices are set to increase substantially. This time the hike will be limited to Punjab which has had quite a turbulent year.
This story begins in the summer of 2024, not 2025. Cement companies located in Punjab and KP at the time were having a blastselling cement at their historic peak prices.
Cities like Lahore saw cement prices reachRs1600 per bag while other markets such as Gujranwala and Sialkot saw prices go up to was not a sudden occurrence. Prices were going up consistently for several months despite reduced demand and shrinking capacity utilization.
For north players—both from Punjab and KP—the price increase was faster than companies located in the south. After the excise duty increase last year, prices kept surging week after week before reaching their peak in August and September. It wasn't until the end of the year that prices began to ease, remaining volatile for much of the year.
During this entire time, southern markets had near constant prices with barely any nudges in either direction. In fact, for much of last year, cement prices in the south—Karachi, Hyderabad, Sukkar, Larkana—contributed little to the volatility of average cement prices. Nearly all southern markets hit their peak as recent as the past 4 weeks. Now markets in Punjab will follow suit.
The government announced an increase in royalty last year—around the same time as the region reached its peak prices—but the companies were able to attain a temperory stay with the court. The Lahore High Court has reached a verdict upholding the provincial government's decision to hike the royalty on limestone at 6 percent of the sale price of cement. This will hit companies in the north substantially.
If these companies are unable to increase prices at desirable levels—given also that other regions are not facing the same increase in raw material costs—they may also suffer a loss to their margins compared to companies located in KP or Sindh.
The cement industry has faced an acute dearth of demand in the past two years. While the upcoming year may change that, given higher development spending and prospects of a subsidy scheme for new mortgages, cement prices play an indomitable role in how well companies perform financially.
How astutely they set prices will determine companies in Punjab be able to absorb the higher cost and still make strong margins in the upcoming year as competition for market share grows?
