Pakistan’s coal imports up by 10% in April ’21 as cement demand drives growth

Pakistan recorded an increase 10.2% m-o-m in its thermal coal imports in Apr’21 as the same stood at 1.43 mn t against 1.30 mn t in March, CoalMint’s vessel-line up data reveals.

While imports from South Africa recorded a sharp increase of 12.6% m-o-m at 1.10 mn t, imports from Indonesia rose by 3.8% at 0.27 mn t. Imports from Australia fell marginally by 0.4% m-o-m and stood at 59,750 tonne.

Cement sector propels S.African coal demand

Pakistan’s cement sector, which is one of the biggest consumers of South African coal, posted a robust growth of 40.4% y-o-y in Apr’21 as total sales reached 4.94 mn t against 3.53 mn t in Apr’20, according to the data released by All Pakistan Cement Manufacturers Association (APCMA).

Pakistan’s cement sector dispatches have been consistently rising since past few months since the resumption of economic activities post the COVID-19 curbs on the construction industry, and other businesses, were lifted. The government’s flagship housing scheme launched last year which involves construction of five million houses for economically backward segment is also driving the cement demand m-o-m basis.

Rising Indonesian prices weighs on buying appetite

The sharp rise of 35% m-o-m basis in Indonesian thermal coal prices amid surged demand from China made coal importers in Pakistan to rely more on South African coal instead of Indonesian fuel.

Australian coal had made its way to Pakistan last year due to the dramatic fall in its prices amid changed trade dynamics (due to Chinese ban on Australian coal). However, escalated freights since last two months have made Australian coal an expensive option for Pakistan, making buyers there to switch back to S.African and Indonesian coal.

Outlook

In the long-run increased cement demand and production is likely to further push the country’s coal imports. The massive reduction of 625bps in Pakistan’s central bank’s policy rate from 13.3% to 7% during March and June last year is likely to offset the impact of the COVID-19 pandemic as well.

The availability of cheaper long-term financing for new and old projects under the Temporary Economic Refinance Facility (TERF) initiative, which has diluted the borrowing cost of the industry across different sectors, is already driving the cement manufacturers decision to expand their existing capacities and increase their production.