PSDP Allocations for CPEC Phase 2: Cement and Steel Stocks to Benefit from ML-1, Dry Port Projects

What the CPEC Phase 2 allocations changed

The federal government has outlined its Public Sector Development Programme (PSDP) for fiscal year 2026-27, earmarking funds for the second phase of the China-Pakistan Economic Corridor (CPEC). This new phase signals a strategic shift from the initial focus on energy and transport infrastructure towards industrial cooperation, technology, investment, and academic exchanges. Key allocations include Rs1 billion for "New Initiatives under CPEC 2.0" to broaden the corridor's scope. In the transport sector, Rs1.056 billion has been set aside for preliminary design, consultancy, and technical preparations for the Main Line-1 (ML-1) railway upgradation project and a dry port near Havelian. An additional Rs50 million will support CPEC-related rail projects within the Ministry of Railways. For industrial cooperation, Rs30 million has been allocated to the Project Management Unit of the CPEC Industrial Cooperation Development Project, aimed at fostering investment and collaboration between Pakistan and China.

Why it matters for cement and steel stocks

While the second phase of CPEC emphasizes industrial and technological cooperation, the immediate, concrete allocations for the ML-1 railway upgradation and a new dry port near Havelian represent significant construction projects. Such large-scale infrastructure development directly translates into increased demand for essential building materials like cement and steel. The Public Sector Development Programme is the government's primary vehicle for funding development projects, and its allocations directly stimulate economic activity in sectors tied to construction. As these projects move from planning to execution, they will require substantial quantities of both cement and various steel products, providing a boost to the manufacturing companies in these sectors.

Which stocks, and why

The renewed focus and funding for major infrastructure projects under CPEC are positive for companies in the cement and steel sectors:

For cement manufacturers, the demand for building materials for railway lines, bridges, and the dry port will be substantial. This includes companies like Lucky Cement, the largest cement maker, Maple Leaf Cement, Fauji Cement, Kohat Cement, Cherat Cement, Pioneer Cement, and D.G. Khan Cement. Increased dispatches for these projects would help absorb existing capacity and potentially improve pricing power, which refers to a company's ability to raise prices without losing too much demand. This would be a long-term positive impact as infrastructure projects typically span several years.

Similarly, steel manufacturers will see a positive impact from the demand for rebar, structural steel, and other steel products required for railway tracks, bridges, and dry port facilities. Companies such as Mughal Iron & Steel, which produces long steel products like rebar, International Steels, a flat steel producer, and Amreli Steels, another major rebar manufacturer, are likely to benefit. Higher demand from these large projects could lead to better capacity utilization and potentially stronger margins, which are the profits a company makes from its sales after covering its costs.

What to watch

Investors should monitor the actual commencement and progress of the ML-1 railway upgradation and the dry port project. Key indicators to watch include tender awards for construction, official ground-breaking ceremonies, and subsequent updates on project timelines and funding disbursements. Cement and steel dispatch data, particularly for the northern region where Havelian is located, could provide early signals of increased demand. Any further announcements regarding the specific industrial projects under CPEC Phase 2 could also open up new avenues for other listed companies, but for now, the construction-related impacts are the most concrete.