ABSTRACT

The paper focused on cement industry of Pakistan. It answered questions like industry
attractiveness, competitive forces, SWOT analysis, industry environment and other industry traits
or features. The project discussed history, current scenario and future growth of the industry. The
role of government and certain issues like per capita consumption of cement in Pakistan, sector
profitability, growth chances, Oligopolistic competition among cement firms, are discussed. The
productive capacity, dependence on suppliers, and foreign investment in cement sector is also
discussed.

TABLE OF CONTENTS

CHAPTER 1 CEMENT INDUSTRY PAKISTAN

1.1 HISTORY

1.2 CEMENT SECTOR IN NINETIES

1.3 CEMENT SECTOR ROLE IN ECONOMY

1.4 PAKISTAN: STRATEGIC LOCATION

1.5 CEMENT SECTOR: CURRENT SCENARIO

1.5.1 AN OVERVIEW

1.5.2 CURRENT PROBLEMS

CHAPTER 2 INDUSTRY ANALYSIS

2.1 INDUSTRY SWOT ANALYSIS

2.2 THE MAJOR PLAYERS

2.3 THE BASIC FEATURES OF CEMENT INDUSTRY PAKISTAN

11

2.4 CEMENT INDUSTRY PAKISTAN ENVIRONMENT

16

2.5 MAIN CONSUMER (BUYER) OF CEMENT SECTOR

16

2.6 FORCES TO CHANGE INDUSTRY

17

2.6.1 GOVERNMENT PRESSURE

17

2.6.2 PRICES OF COAL

17

2.6.3 TAXES ON CEMENT

17

2.6.4 CONCRETE ROADS

17

2.7 TYPES OF CEMENT

18

2.7.1 WET PROCESS

18

2.7.2 SEMI-WET PROCESS

18

2.7.3 DRY PROCESS

18

2.8 MAJOR TECHNOLOGY SHIFT

18

CHAPTER 3 FDI, COMPETIVE EDGE AN D 5 FORECES ANALYSIS

3.1 KEY FACTORS FOR COMPETITIVE EDGE

20

3.2 FOREIGN INVESTMENT

20

3.3 PRICE MONOPOLY

21

3.4 MICHEAL PORTERS 5 FORCES

22

3.4.1 NEW ENTRANTS

22

3.4.2 BUYERS

22

3.4.3 SUPPLIERS

22

3.4.4 SUBSTITUTES

23

CHAPTER 4 FUTURE, GROWTH POTENTIAL AND INDUSTRY ATTRACTIVENESS

4.1 CEMENT SECTOR FUTURE FORECAST

24

4.2 THE LONG-TERM DOMESTIC GROWTH SCENARIO

24

4.3 SUPPLY SIDE OF THE PICTURE

25

4.4 PAKISTAN ENTRY INTO WORLD CEMENT MARKET

26

4.5 FUTURE

27

4.6 IMPACT ON BUDGET

4.7 SOME RECOMMENDATIONS

29

4.7.1 GOVERNMENT PRESSURE

29

4.7.2 EXCISE DUTY

29

4.7.3 EARNING FOREX

30

4.7.4 SEEK DEMAND/SUPPLY FORCES

30

REFERENCES

1 CEMENT INDUSTRY PAKISTAN

1.1 HISTORY
At the time of independence in 1947, only one or two units were producing grey cement in the
country. During the decade of 1948-58, the number of cement units increased to six. During the
Ayub era the economy started to grow and the construction activities underwent a boom. To meet
the growing demand of cement new units were set up. During the decade of 1958-68, the number
of cement units increased from 6 to 9. During the following period of Zulfiqar Ali Bhutto all the
industrial units, including cement industry, were nationalized, therefore, no new unit was set up
during 1971-77. During the period of General Zia-ul-Haq, 1977-88, denationalization of
industrial units boosted the investments. Housing and construction industries picked up and the
demand for cement increased. Thus, the number of cement units increased from 9 to 23 and
finally 24.
Pakistans cement sector has come a long way. At Partition, in 1947, Pakistan had only five
cement plants (one of which was in East Pakistan) having a total annual capacity of 650,000

tons. Demand at that time was estimated at over a million tons. In the 50s five new cement
plants were set up with a total capacity of 3.3m tons. Four more plants Maple Leaf, Javedan,
Gharibwal and Mustehkam were set up in the 60s. By 1969, Pakistans cement industry had an
annual rated capacity of 2.8m tons. Indeed, the Ayub era was a good time for cement there
was growing demand and new cement plants were set up to meet this demand. Then the first
blow to the industry came. Under the Economic Reforms Order of 1972 all private sector cement
plants were nationalized and merged with state owned plants to form the State Cement
Corporation of Pakistan (SCCP). This heralded the start of the State Cement Era (1972-92).
Total production just before nationalization had touched 3.5m tons. By the end of this era in
1992, it had increased to just 8.4m tons. By 1977, Pakistan, a country rich in all the raw materials
required for cement, had to start importing. This would continue until 1995.

Between 1977and 88, government policy shifted towards denationalization and emphasis on
housing and construction. To meet the demand, in the 80s, seven units with a total capacity of
2.54m tons were allowed by the government to be set up in the private sector and four plants
were set up by the SCCP in the public sector. The private sector plants were Cherat (1985),
Pakland (1985), Attock (1986), DhadaBhoy (1988), Essa (1988), Anwarzeb White Cement
(1988) and FECTO (1989). The public sector plants were Thatta (1983), Dandot (1983), Kohat
(1983) and D.G. Khan (1985). By the end of this period, there were a total of 24 cement plants in
the country. But it was not an easy time for private sector plants. Their prices had to compete
with prices fixed by the SCCP, which were on the lower side. In 1992, the State Cement Era
came to an end with the privatizations of eight cement plants: Maple Leaf, Pak Cement, White
Cement, DG Khan, Dandot, Gharibwal, Zeal Pak and Kohat. Other privatizations would follow

between 1986 and 2000. Today, out of the 24 existing cement units, only two remain in the
public sector Mustehkam in the north and Javedan in the south. Twenty-two are in the private
sector and 21 are listed on the Karachi Stock Exchange.
1.2 CEMENT SECTOR IN NINETIES
During the early nineties there was an acute shortage of cement in the country, particularly in the
north. Demand could not keep pace with supply and Pakistan was forced to continue importing
cement. Importing cement is an expensive affair. Since it is a heavy commodity, freight and
transport charges are often exorbitant. Due to the shortage coupled with high cost of imports,
cement prices in the early 90s were high. But demand for cement was growing rapidly (at an
average of 8% a year). The economy also looked as if it was heading towards a high growth
phase. There was some foreign investment coming in, significant infrastructure development
projects were predicted, many Independent Power Producers were cropping up and the
population continued to grow unabated. The GDP growth rate was estimated at 6.5% and
population growth at 3.2%. Therefore, it looked as though there would be an ever-increasing
demand for cement. Because it was felt that the economy would grow significantly and there
would be a high demand for cement, many of the existing plants Cherat, D.G Khan, Maple
Leaf, Pakland, DhadaBhoy, AC Wah and Kohat significantly expanded their capacities. Five
new plants were also set up in the private sector during the mid-nineties to meet expected future
demand: Pioneer (1994), Lucky (1996), Askari (1997), Fauji (1997) and Bestway (1998).
Because demand was higher in the north, these five new cement plants were all set up in what
the All Pakistan Cement Manufacturers Association (APCMA) calls the North Zone. Pakistans
cement sector was; therefore, ready to supply the demand that was predicted.
1.3 CEMENT SECTOR ROLE IN ECONOMY

Cement industry has been playing a pivotal role in the socio- economic development of the
country. The industry is contributing around Rs. 30 billion per annum to the national exchequer
in the shape of Excise Duty and other taxes and is also adding around Rs. 100 billion to the GDP
of the country each year. The industry has been offering direct / indirect employment
opportunities to more than one lakh people. Total investment in the cement industry currently
exceeds Rs. 160 billion and is likely to go further up to Rs. 200 billion by 2010. Unfortunately
despite unprecedented growth in demand of cement, the industry is currently not able to generate
adequate margins due to low level of prices of cement.
1.4 PAKISTAN: STRATEGIC LOCATION
Pakistan holds a key strategic location in South Asia and shares a border with India in the East,
Afghanistan and Iran in the West, China in the North and the Arabian Sea in the South. The
country stretches over an area of 803 940 km2 and is divided into four provinces or states: Sind,
Balochistan, Punjab and North-West Frontier. The population is 151 million. There are 22
cement plants with an annual capacity of approximately 18.55 million t. The majority of the
plants are located in the North and South of the country mainly because of the proximity to raw
materials and markets.
They tend to use the latest dry process technology. Until recently demand was