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Past of Cement Industry of Pakistan

Global Scenario of the Cement Industry


During the year 2004 worlds cement production has increased by 2.56% by 50 million
tonnes and consumption increased by 3% as compared to previous year. World demand for
cement is forecast to increase 5 percent per year through 2008.

Cement Industry - Regional Review

China:
China is the largest producer and consumer of cement, having 850 million tonnes
production capacity and consumed 36 percent of total worlds production. From 2000
to 2004, the cement industry showed an average annual growth of 9 %. In 2004, the
total output of cement in China increased by 12.5 % from 2003. The industry has
benefited from the growth in real estate and the rapid growth of the national economy.
It is anticipated that Chinese cement industry will grow by 5% till 2008, owing to
boom in construction activity, and will account for 44% of global demand in 2008.
The demand for cement is expected to continue to grow as China implements its
strategies of developing the western regions, reinvigorating the traditional industrial
bases in northeast China, its urbanization drive, its projects for transportation of
natural gas, and projects related to the 2008 Beijing Olympics and the 2010 Shanghai
World Expo.

India:
With the total installed capacity 163 million tonnes in 2005 India is the second largest
producer of cement in the world accounting for approximately 6% of the global
production. Actual cement production in 2003-04 was 123.50 million tonnes as
against a production of 116.35 million tonnes in 2002-03, which is an increase of
6.15% over 2002-03. Cement production during the year 2004-05 (April-January,
2004-05) was 108.06 million tonnes (provisional), registering a growth of 7.10%. The
cement production is on an up move because government has increased spending on
infrastructure and huge investments are flowing in the road and the power sectors.
Other sectors like ports and airports will also see rise in investments over the next 6 to
12 months. Demand in the housing sector and the revival in the capex cycle are
further driving the demand for cement. Production target of 133 million tonnes has

been set for the year 2004-05 and industry is expected to grow at the rate of 10% per
annum and it is expected to add capacity of 40-52 million tonnes, mainly through
expansion of existing plants.

Iran:
Irans current production capacity stands at 32 million tonnes, and it is expected that
capacity will rise to more than70 million tonnes by 2010. During the current year
three plants are expected to come online and capacity will reach up to 37 million
tonnes at the end of the year. Current boom in housing sector and overall
infrastructure activity in the country, Iran is consuming most of its production within
the country. However after completion of its ongoing expansion in 2010, it would be
able to export the commodity in the region. Iran stands 14th in terms of cement
production, while 12th and 15th in terms of consumption and export of the
commodity respectively. Further due to ample availability of raw material and fuel
Iran has most economical rates of the commodity in the world.

Export Outlook
During FY05, cement export stood at 1.6 million tonnes, representing 40% growth as
compared to last corresponding year (154% increases in 2003-04). Growth in cement export
remained slow down during FY05 owing to the fact that superfluous domestic demand has
surpassed supply as most of the local cement manufacturers were operating at 100% capacity
and still werent able to meet present demand. Presently some of the cement companies are
exporting cement to Afghanistan, Iraq and UAE only to maintain their presence in these
markets. After completion of major expansion plans in Pakistan in 2007, there would be a
surplus to export in these markets however in the same period Iran would also be able to
approach vigorously these markets as its most of the cement plant will start to come online.
At that juncture there would be extreme competition between both countries to capture these
markets, especially the war-ravaged countries (Iraq and Afghanistan). Iran would get benefit
in terms of price as cement prices in Iran is among the cheapest in the world as the price of
cement in Iran remained between US $ 20 - 25 per ton. On the other hand it is expected that
being the US ally, Pakistan would get most of the favour in order to keep its market share in
these markets given the fact that all the construction activities in Iraq and Afghanistan would
be taken by US. Despite the fact that cement constitutes as one of the basic necessities for
shelter, the policy makers have subjected the cement sector to the highest taxation in the

region. The levy of General Sales Tax (GST) on cement is Rs660 per ton in Pakistan as
compared to Rs320 in India. In the light of this tax regime, it is said that Pakistan has one of
the highest tax rates on cement in the Asian region. The impact of such tax and duty structure
has resulted in almost 40 per cent increase in the cement price per 50 kg bag when compared
to India suppressing demand for Pakistan cement.
Worlds Cement Production (Qty = 000 tonnes)
Countries

2001

2002

2003

2004

2005

United States

90,450

91,300

92,600

99,000

99,100

Brazil

39,500

39,500

40,000

38,000

39,000

China

626,500

705,000

750,000

934,000

1,000,000

Egypt

24,500

23,000

26000

28,000

27,000

France

19,839

20,000

20000

21,000

20,000

Germany

28,034

30,000

28000

32,000

32,000

India

100,000

100,000

110,000

125,000

130,000

Indonesia

31,100

33,000

34,0000

36,000

37,000

Iran

26,650

30,000

31,000

30,000

32,000

Italy

39,804

40,000

40,000

38,000

38,000

Japan

76,550

71,800

72,000

67,400

66,000

Korea

52,012

55,500

56,000

53,900

50,000

Mexico

29,966

31,100

31,500

35,000

36,000

Pakistan

9,876

9,985

11,410

13,344

17,112

Russia

35,100

37,700

40,000

43,000

45,000

Saudi Arabia

20,608

21,000

23,000

23,000

24,000

Spain

40,512

42,500

40,000

46,800

48,000

Thailand

27,913

31,700

35,000

35,600

40,000

Turkey

30,120

32,600

33,000

38,000

38,000

Others

351,014

350,015

348,590

367,656

374,888

World total

1,700,000

1800,000

1,860,000

2,130,000

2,220,000

Present of Cement Industry of Pakistan


Overview
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.
The cement industry in Pakistan has come a long way since independence when country had
less than half a million tonnes per annum production capacity. By now it has exceeded 10
million tonnes per annum as a result of establishment of new manufacturing facilities and
expansion by existing units. Privatization and effective price decontrol in 1991-92 heralded a
new era in which the industry has reached a level where surplus production after meeting
local demand is expected in 1997.
The cement industry is a highly important segment of industrial sector that plays a pivotal
role in the socio-economic development. Though the cement industry in Pakistan has
witnessed its lows and high in recent past, it has recovered during the last couple of years and
is buoyant once again.
There are in all 23 units, from which 4 units are in the public sector while the remaining 19
units are owned by the private sector. Two of the four units in the public sector had to close
down their operations due to stiff competition and heavy cost of production. The Pakistan
cement market is divided into two discrete regions with 29 firms production capacity
of 44.09 million tonnes
The cement industry in Pakistan has come a long way since independence when the country
had less than half a million tones per annum production capacity. By now it has exceeded 10
million tones per annum as a result of establishment of new manufacturing facilities and
expansion by the existing units. Privatization and effective price decontrol in 1991-92
heralded a new era in which the industry has reached a level where surplus production after
meeting local demand is expected in 1997.

The cement industry in Pakistan faces two serious threats: closure of units based on wet
process, and poor cash flow rendering the units incapable of debt servicing due to increasing
cost of electricity, furnace oil and imported craft paper used for cement packing. The cost of
furnace oil alone has increased by nearly 100% in the last 15 months alone. With the increase
in furnace oil the increase in electricity tariff has also become inevitable.
North Region:
North Regions consists of the following areas:

Punjab

NWFP (Khayber Pakhtoon Khua)

Azad Kashmir

Upper parts of Balochistan

South Region:

Entire province of Sindh

Lower parts of Balochistan

Province wise distribution of cement plants is as under.

Providence
Punjab
Sindh
NWFP
Baluchistan
Total

Units
8
8
6
1
23

Capacity (MillionTonnes)
7.488
3.851
4.945
0.758
17.040

CURRENT INDUSTRY STRUCTURE


Cement industry of Pakistan is one of the major and important industries contributing in the
economy of the country. There are almost more than 29 small and large cement companies
are working in the industry, they are producing different varieties of cements like ordinary
grey Portland, white, slag and sulphate.
The competition in the industry is not much perfect, it is almost like oligopoly in its nature
because the product is homogenous in nature and all of the companies are producing the same
composition. There are total number of units are 25 from which 4 units are in the public
sector while the remaining 21 units are owned by the private sector. Two of the four units in
the public sector had to close down their operations due to stiff competition and heavy cost of
production. The cement plants are located in every province of Pakistan. The cement industry
distributed among two areas one is northern and the other is southern, the northern region is
covering almost 85% of the total production and reaming is covered by the southern region.
Currently cement industry of Pakistan has the ability to export to its neighbour countries like
India, U.A.E, Afghanistan, Iraq and Russian states. The cement exports witnessed a healthy
growth of 65%, to over 6 million tons during 7 months of the current fiscal year mainly due

to rise in international demand. The exports may reach to 11 million tones and earn approx $
700 million during 2008-09. The slow construction activities in the country during the period
badly upset domestic sale of cement, which depicted decline of 15%, to 10.77 million tons as
compared to 12.59 million tons of last fiscal year.

Growth Pattern of Cement Industry of Pakistan


Cement is one of the major industries of Pakistan as the country is rich in cement raw
material. The last few years have been a golden period for cement manufacturers, as the
government increased spending on infrastructure development. High commercial activity and
rising demand for housing on account of higher per capita income has kept cement off take
growth in double digits.
During the financial year-07, cement sales registered a growth of 31 percent to 17.53 million
tonnes as against 13.5 million tonnes sold last year. The cement sales during July-February08 showed an increase, both in domestic and regional markets to 18.17 million tonnes. The
domestic sales registered an increase of 7.2 percent to 14.4 million tonnes in the current
period as compared to 13.5 million tonnes last year whereas exports stood at 3.7 million
tonnes as against 1.8 million tonnes in the corresponding period last year, showing an
increase of 110 percent.
Pakistan cement industry has a huge potential for export of cement to neighbouring countries
like India, U.A.E, Afghanistan, Iraq and Russian states. There has been a robust growth of
cement demand seen both in domestic and export market during the fiscal year ended June
30, 2007. The industry achieved an overall growth of 32% with domestic demand of cement
increased by 24.95% whereas exports increased by 111.86%. The overall growth achieved by
cement factories for the year under review was 111.29% consisting of domestic and exports
markets at 71.02% and 335.12% respectively.

Contribution to National Economy by Cement Sector:


The cement industry is contributing Rs 30 billion to the national exchequer in the form of
taxes. This sector has invested about Rs 100 billion in capacity expansion over the last four
years. The industry is divided into two broad regions. The northern region has over 87%
share in total cement dispatches while the units based in the southern region contributes 13%
to the annual cement sale. The per capita consumption of cement has risen from 117 kg in
FY06 to 131 kg in FY07.

The cement industry of Pakistan entered the export markets a few years back, and has
established its reputation as a good quality product. The latest information is that India will
import more cement from Pakistan. So far 130,000 tonnes cement has been exported to the
neighboring country.