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Cement Industry

Overview 

Cement is considered to be the key element in the construction industry, globally. With its directly proportional linkage with the country’s economy, cement plays a vital role in upgrading the GDP of a country. The key drivers for cement demand/ consumption growth are infrastructure projects (CPEC) & real estate sector. Around 45% of total cement produced is consumed in Real estate sector. (Increasing urbanization with urban areas having lower number of people per household, keeping this trend rural areas are creating additional demand for housing units). Moreover, Around 45% of total cement produced is consumed in Public development & infrastructure projects. (Large scale infrastructure projects i.e. dams, hydropower plants, Gwadar deep sea port and motorways). The recent growth in domestic cement demand has been complemented by surging exports for the second consecutive months as cement export increased by a whopping 85 percent in March 2018. The exports started improving February 2018 and have continued to improve in March 2018 as well on account of sudden surge to Afghanistan that increased from 0.037 million tons in March 2017 to 0.106 million tons in March 2018. (‘Economic Survey of Pakistan’)

 

Industry Analysis 

 

Strong correlation exists between GDP and Cement demand growth.

  • GDP growth (FY 2018): 5.79%.

  • Growth rate of Local cement demand is continuously increasing and depicting 10% CAGR (FY14-18) about 2x average GDP Growth.

  • Given the strong local demand, proportion of local sales in total dispatcheshas increased from 75% during FY13 to 90% in FY18.

  • Decline in proportion of export sales is attributable to imposition of anti-dumping duty on exports to South Africa along with slowdownin dispatchesto Afghanistan.

  • Threat of imports to local dispatches is also mitigated due to high freight cost of imports from China, also cement from Iran has not been able to make major inroads in the local market due to comparativelylower quality. (Duringthe period underreview FY2014-2018) 10 Cement

  • Higher utilization, strong local demand and healthy gross margins have encouraged cement manufacturers to announce an increase in their capacities. As a result 21.8M tons of capacity will be added between FY18 and FY21.

  • Capacity utilization in North is forecasted to remain substantially higher than South. Mainly because currently;

  • South Zone accounts for 23% of total installed capacity

  • North Zone accounts for 77% of total Installed capacity.

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Existing Companies

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