Jan 28 - Feb 03, 2008

Pakistan is set to rock the world cement market by making its entry in a big way. The country plans to further enhance its production capacity and fully explore the major markets including India, Russia, UAE, Yemen, Sudan, Ethiopia, Algeria and other North African countries for the purpose. Owing to the shortage of cement in the region and rising demand from India and North African countries, Pakistani cement manufacturers are poised to benefit from the current cement boom in terms of high export price. Under a deal, Islamabad is to export about 0.1 million tons cement to India on monthly basis.

Pakistan is the most feasible cement exporting country for India, as it is most competitive in the form of transportation charges as compared to other regional countries, which usually constitute of 15 percent of the imported price of cement. There is also no big gap in the cement prices of Pakistan and India. China is the biggest rival to Pakistan in the regional markets. The quality of Pakistan's cement is however far better than China and it has already exported around 3 million tons of cement to India and North African countries. Pakistan produces four types of cements and the raw material- gypsum, limestone, clay/shale- used for cement manufacturing is found in abundance in the country.

Growing Cement Demand: Pakistani cement companies have completed additional capacities of domestic cement manufacturers to reap the possible benefits from India's rising cement demand. The main Pakistani cement manufacturers including Bestway Cement, Lucky Cement, and D G Khan Cement have set up new plants for further expanding their production capacities. Bestway Cement plans to expand its capacity by 4,000 tons per day, Lucky Cement 6,000 tons per day and D G Khan, the first exporter of cement to India, is also working on similar plans. Maple Leaf Cement is already running on full capacity since July last year.

There is a great demand for Pakistani cement in North African countries. The cement is exported to these countries through the Red Sea port of Djibouti. According to an estimate, Pakistan earns at least $110 per ton from its cement exports to African countries. Pakistani exporters have also reportedly received fresh enquiries from Russia and buyers are quoting very attractive prices. According to the industry sources, cement exports from Pakistan is presently going through containerized vessels. The adequate chartering arrangements can double the country's cement exports.

Pakistan has already been supplying cement to Afghanistan for the last many years. It has been the key player and a traditional supplier of cement in Afghan market. The cement units in northern areas of the country continued to feed the Afghan market by supplying up to 2.5 million tons. Like Afghanistan, Pakistani exporters have been exporting cement to the war-torn Iraq where the demand for cement has been higher for reconstruction work. However export to Iraq remained irregular due to acute port congestion.

Importing Countries: The export demand for cement registered a robust increase of 36.8 percent during first half of the fiscal year 2007. As per quarterly report of State Bank of Pakistan (SBP), the cement industry attained significantly high growth of 12.1 percent during the period. Major markets for Pakistan cement exports were Afghanistan and the UAE. The remarkable performance of cement sector was due to the enhanced installed capacity, which had more than doubled during last five years, as well as to the rise in local demand and strong external demand. The rise in exports came after government decisions regarding restoration of duty drawback on cement exports, in which the Central Board of Revenue (CBR) allowed duty drawback at the rate of Rs 25.08 per ton on export of cement. The duty drawback facility was effective from September 27, 2006.

During the last three years, the cement manufacturing has been buoyant in Pakistan and the industry has shown tremendous growth in recent years. Owing to the increasing local and export demand due to rising construction activities and regional cement shortages, Pakistani cement sales jumped 24 per cent in the first half of fiscal year 2007-08 as compared to the last fiscal year 2006-07. Exports of cement increased 149 per cent to 2.99 million tons from the 1.20 million tons shipped a year earlier. The total sales reached 13.9 million tons for the six months to December, compared with 11.18 million tons in the same period of 2006. The cement sales for December 2007 fell 9.5 per cent to 1.9 million tons as compared to the same month in 2006 due to the Eid holidays and the political turmoil in the country following the assassination of Benazir Bhutto.

The local and export dispatches were recorded at 2,281,816 metric tons in March last year. The cement industry dispatches had touched the level of 2 million metric tons last January but the March figures registered record levels in the history of cement industry. On exports front, the industry has seen impressive growth. Last March, Pakistan shipped 18,600 metric tons cement to India alone. Similarly, export to Iraq, Iran, Afghanistan and UAE has witnessed an exceptional growth. By the end of year 2006, the Pakistan cement industry production capacity had reached to the level of 3.3 million tons per annum. The production capacity of cement sector has risen to 15 million tonnes per annum, from 18 million tonnes per annum in July 2005 to 33 million tonnes in January 2007. The current demand-supply situation in Pakistan cement sector indicates excess cement production capacity of around 8 million tons.


The cement export to India started in March last year when Pakistan's leading cement manufacturer D G Khan Cement dispatched 1,500 tons cement to India as a sample at a price of around $90 per ton. After the dispatch, the local cement manufacturers received a bulk of inquiries from India for the import of commodity. Analysts believe that India is the most feasible market for exporting Pakistan's excess cement capacity. The estimated demand/supply gap in India is around 10 million to 12 million tons per annum and the cement demand started to outpace supply.

Pakistan and India are currently engaged in negotiations to devise a comprehensive mechanism for the export of cement. According to the official sources, the immediate barrier in the way of export is inadequate transportation facilities for the lucrative trade across the border. Both the sides have realized the need for improving road transportation facilities for smooth flow of trade. Due to abolished countervailing duty and additional customs duty on cement imports, the Pakistani cement would become competitive in the huge Indian market. Analysts calculate that the landed cost of Pakistani cement in India would be cheap.

The two countries have agreed to allow trucks to move into each other's border up to half or one km and construct truck terminal facilities. While Pakistan has already developed a truck terminal at Wagha with a capacity to accommodate about 100 truck lorries, India has yet to construct the facility on its side at Attari border.

Needing Governmental Support: With 75 per cent imports and 25 per cent exports from Pakistan, the bilateral trade balance currently goes in favor of India. The balance may be corrected or improved if Pakistan increases its cement exports to India and captures the market, as India is presently facing acute shortage of cement. Trade Development Authority of Pakistan (TDAP) can play a significant role in this regard. Pakistani exporters however complain that the TDAP is not extending them any support to capture the Indian market. It is also not giving freight subsidy for export of cement, which is a non-traditional commodity, to India. Cement exports are also being affected by the high freight charges, which are received by the tucks and foreign shipping companies for the haulage of cement from Pakistan to India. The cement exports to India have largely been through sea or by railway. While Pakistan railways charge US$8 per ton as freight for carrying cement to Indian border, India only charges US$3 per ton on its side.

Though India is the non-traditional cement market, yet a number of non-tariff barriers (NTB) are hampering Pakistani exporters to export cement to India. Despite all these barriers and problems, the Pakistani exporters, who have already got registration and certification from the Bureau of Indian Standard (BIS), are struggling hard to capture the Indian cement market. Last year in October, around 0.2 million tons of cement were exported to India. The Pakistan Railways have doubled cement loading capacity to India.

The Pakistani exporters have yet to fully explore the Indian market where annual demand stands at around 5 million tons. India has shown willingness to import maximum quantity of cement from Pakistan through sea as well as land routes. India has great demand for cement and the Pakistani industry has the capacity to meet the demand.