No doubt, the cement is the major ingredient used in the construction industry in any economy. Researchers revealed that the cement consumption has a direct correlation to economic growth and improvement in the living standards of society. Traditionally, growth in worldwide cement trade has been lower than rise in global trade on account of high freight cost and obtainability of raw material.
International cement experts also calculated that with worldwide growth facilitating optimistic construction trends, cement consumption is on the increase. They have also urged in a statement that world cement projected during 2016 that the market for construction aggregates would rise to 51.7 billion tons during 2019, an advancement rate of 5.2 percent yearly.
As residential construction and infrastructure investments dominate the market, more contractors will look to the advantages of concrete drying solutions to facilitate the meeting of project deadlines, also ensure the quality and performance of the aggregate materials used. On the other hand, Pakistan has a well-developed cement industry with abundant raw material obtainability in the country.
Pakistan ranks amongst the top 5 exporters and 14th largest cement producer globally. Industry experts also calculated that exports were the saving grace for Pakistan’s cement industry during August 2018 as local consumption unexpectedly declined 13.73 percent – the first such fall in the previous 3 years.
According to the statistics showed by the All Pakistan Cement Manufacturers Association (APCMA), local sales reached at 2.895 million tons during August, of which 2.326 million tons were sold by mills placed in the northern part of Pakistan. The remaining 0.569 million tons were sold by south-based mills. In the corresponding month of last year, the north zone sold 2.730 million tons and southern mills dispatched 0.625 million tons.
Furthermore, cement exports increased 35.82 percent during August 2018 as 0.557 million tons were shipped to international markets against exports of 0.409 million tons during August 2017. Domestic cement sales in first two months of the current fiscal year edged down 5.31 percent. From the north zone, sales declined 8.80 percent while from the south they dropped 10.91 percent. Exports from the north zone dipped 29.66 percent whereas from the south, they surged 158.40 percent. The abrupt fall in domestic cement offtake has taken the manufacturers by surprise.
Presently different sources mentioned that the cement industry of Pakistan has urged the Government of Pakistan to rise custom duty on import of clinker to support the local manufacturers, besides reducing cost of doing business in Pakistan to encourage the local sale. Source also said that the government of Pakistan has been losing major chunk of its market in Afghanistan to Iranian cement. The high energy cost has made the cement more expensive as cement is an energy intensive sector.
The cost of electricity and gas in the country is the highest in the region while extra duties on coal imports have nullified the lower cost of coal in the worldwide markets. On the domestic front, high government levies have encouraged some unscrupulous elements to import under-invoiced Iranian cement, resulting in drop in domestic sale. The industry suggested that the imports of cement should not be permitted until the importers register themselves with Pakistan Standards and Quality Control Authority to certify the quality of their cement in line with the Indian government also all other importing states’ authorities. Sources said that exports are down not only due to high cost of doing business but also due to the lax attitude of the regulators who are ignoring malpractices in imports.
Structure of the industry
It is noted that the cement industry of Pakistan can be divided into two separate regions; North & South Zone. North Zone includes provinces of Punjab, KPK, Azad Kashmir, Gilgit-Baltistan and parts of Balochistan while South Zone includes provinces of Balochistan and Sindh also. There are 19 and 5 cement units in the North and South Region, respectively. Players in the North Zone show around four fifth of the total rated capacity. Both North and South zones have their separate demand-supply dynamics.
Players operating in the South Market have the opportunity to tap a number of export markets thus offering greater room for revenue diversification. However, with a number of main export markets (Nigeria, Tanzania, Mozambique, Iraq, Ethiopia and DR Congo) for South players undergoing local capacity expansion, reliance on imports may reduce affecting dispatches, going forward. Export of South players has already been impacted because of anti-dumping duty imposed by South Africa in FY2015. Given the stronger domestic demand in North Zone, reliance on exports is lower; export potential for players in the North Zone is limited chiefly to Afghanistan where influx of cheaper Iranian cement and limited construction activity because of withdrawal of allied forces has contributed to fall in exports.