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Cement sector

Market research
2016
An Overview
Pakistan has a well-developed cement industry with abundant raw
material availability in the country. The country ranks amongst the top 5
exporters and 14th largest cement producer in the world.

Cement is the major ingredient used in the construction industry.


Cement consumption has a direct correlation to economic growth and
improvement in the living standards of society. In country cement
contribute both infrastructure and housing.
Existing Capacities
24 plants with annual production capacity of 44.7mln tons of cement.
In order to absorb rising local demand, it has become imperative for
cement industry to go for expansion which has become the need of
moment before existing capacities finish.
Capacity utilization peaked 99% in Nov-16 despite off peak season.

Historical
The major
Analysis
domestic demand
drivers are Public
Sector Cement Production, Capacity Despatches
Development 50.00 90.00%
Programs 45.34 44.64 44.64 44.64 45.62 45.62 46.3987.10%
(infrastructure), 40.00 42.37 85.21% 85.00%
real estate and 34.22 33.43 34.28 35.40
30.00 31.43 32.51
industrial 30.30
80.00%
construction. 20.00 77.60%
76.79%
In (2016-2017) (Mln. tons) 75.46% 74.89% 75.00%
74.17%
increase in 10.00 72.83%
production 7.24% -6.55% 5.35% 0.00% 0.00% 2.19% 0.00% 1.69% 70.00%
-
capacity due to 38.87

CHCC install (10.00) 65.00%


capacity 0.7mln t. production capacity total despatches Pro. capt % incr/dec
capacity utilization
Historical Local Despatches - Export
Expected increase in
domestic demand 45.0
likely to arise from 40.0
CPEC, cement players 35.0
have already 30.0
25.0
announced to expand
20.0
capacity.
(mln. tons) 15.0
CAGAR of 6 year 10.0
export is (0.90). 5.0
Decrease in exports -
due to anti dumping
duty in export market
(South Africa).

local despatches exports total despatches


Installed Production Capacity
S. No. Name Of Unit Location
Operational Capacity


Clinker Cement
1 Askari Cement Limited 1,050,000 1,102,500 Wah cant
2 Askari Cement Limited 1,500,000 1,575,000 Nizampur
3 Attock Cement Pakistan 1,710,000 1,795,500 Hub chowki, lasbela
4 Bestway Cement Limited 1,170,000 1,228,500 Hatter
5 Bestway Cement Limited 1,035,000 1,086,750 Farooqi, hatter
6 Bestway Cement Limited 3,428,571 3,600,000 Chakwal
7 Bestway Cement Limited 1,950,000 2,047,500 Kalar kahar
Cherat Cement Company
8 2,310,000 2,425,500 Nowshera
Limited
9 Dandot Cement Limited 480,000 504,000 Jehlum
Dewan Hattar Cement
10 1,080,000 1,134,000 Hatter
Limited
11 Dewan Cement Limited 1,680,000 1,764,000 Dhabeji
12 D.G.Khan Cement Limited 2,010,000 2,110,500 D.G Khan
14 Fauji Cement Company Limited 3,270,000 3,433,500 Fateh Jang

15 Fecto Cement Limited 780,000 819,000 Sangjani

16 Flying Cement Limited 1,140,000 1,197,000 Lila

17 Gharibwal Cement Limited 2,010,000 2,110,500 Jehlum

18 Kohat Cement Company Limited 2,550,000 2,677,500 Kohat

19 Lucky Cement Limited 3,605,714 3,786,000 Pezu


Indus highway,
20 Lucky Cement Limited 3,428,571 3,600,000
Karachi

21 Maple Leaf Cement Factory Limited 3,210,000 3,370,500 Daudkhel

22 Pioneer Cement Limited 1,933,571 2,030,250 Khushab

23 Power Cement Limited 900,000 945,000 Nooriabad, dadu

24 Thatta Cement Limited 465,000 488,250 Thatta

Total 44,706,428 46,941,750


Market Leaders
Bestway cement limited market share 17.5%
Lucky cement limited market share 16.2%
D.G khan cement limited market share 9.3%
Fauji cement company limited market share 7.5%

Demand In Cement Sector

In Pakistan, infrastructure projects and the housing sector are


the key drivers for consumption of cement.
Going forward, consumption of cement from these two sectors
is projected to increase.

Housing sector

Sector
Infrastructure
Demand sectors
Housing Sector
Increasing urbanization with urban areas having lower number of people per household
vis--vis rural areas creating additional demand for housing units.
Significant backlog of housing units estimated at 9 million units and announcement of
various plans by the government to address this shortfall.
New affordable mega housing projects (Bahria Town, DHA, and LDA City).

Infrastructure
Infrastructure projects worth $9.8b are planned to be undertaken under China Pakistan
Economic Corridor.
Spending for infrastructure projects as per allocations made under Public Sector
Development Programs particularly for construction of dams, roads and bridges.
Large infrastructure projects include Gwadar Airport, Gwadar Deep Sea Port, Hydropower
project of around 10,000MW capacity and Karachi-Lahore Motorway.

JCR-VIS Credit Rating Company Limited


Developments
Expansion announcements of 10mln tons GWCL.
Anticipated expansion in DGKC, FCCL, FECTO, KOHC and MLCF.
DGCL 7%YoY earnings growth expected in FY17

Key planned expansions/sector events


PIOC Initiation of 12 MW WHR in Dec-16
Grinding unit installation to complete
by Mar-17
CHCC Commercial operation of Line II to start
Dec-16
Operations of 6MW WHR power plant in
Jan-16
Source:
MLCF 40MW coal based CPP to start operations
Foundation
in FY18
Securities
LUCK 10MW WHR to be functional by 3QFY17

Capacity Expansion
4 player announced Cement sector expansion
80
expansion in north region, 5 68 71.3
70
player anticipated expansion 60
58.7
expected in (2020-2021).In 50 45.6 46.8 48.1
south region 4 player 40
(mln. tons)
announced expansion. 30
20
Increase in capacity 71.3mln 6.9 10.6
10 1.2 1.33.3 2.4
t in 2021. 0
2016 2017 2018 2019 2020 2021
capacity announced anticipated

South Region Expansion 3 2.7 Announced


In south region four 2.2
companies are announced 2
1.2 1.3
expansion. In 2019 DGKC (mln. tons)
1
expansion capacity 2.7mln
tons. 0
2018 2019

ACPL DGKC LUCK POWER

Source: Foundation Securities


North Region Expansion
Five companies anticipated
Four companies announced the expansion in (2020-2021)
expansion for next 4 years. Total anticipated 10.2 in north
Total announcement expected in 8.1 region.
in north region.

Announced Anticitonsated
3 3
2.4 2.5
2.5 2.3 2.2 2.5 2.2 2.2 2.2
2 2

(mln. tons) 1.5 1.2 (mln. tons) 1.5 1.1


1 1
0.5 0.5
0 0
2017 2018 2019 2020 2020 2021
CHCC LUCK GWCL PIOC DGKC FECTO FCCL KHOHC MLCF

Source: Foundation Securities


Risk And Challenges
Price War
Further increase in coal price
Delay in materialization of expansion plans
Slow development in Gwadar leading to idle capacity in
South
Lower domestic demand
Increase import from Iran.