Analysis of cement industry Pakistan

1. ANALYIS OF CEMENT INDUSTRY
YEAR 2011
ACKNOWLEDGEMENT
Choice of this industry was made due to the enormous interlinks of its betterment with the other
industries in terms of development. The question which will be answered in this report is whether we
are growing economically or not? This may be proved by a series of explanations and quotations
from all around the world’s top business men including the importers. I thank ALLAH and my
parents for providing me a platform from which I am able to explore my environment and I able to
add to it beneficially. I also thank my group partner for the moral support and course instructor for
developing a mind framework for being logical, confident and up to date to the world economy to
satisfy our role for this very course.

2. EXECUTIVE SUMMARY
Cement industry is the backbone of all the industries. It is connected to the growth of approximate
40 other industries and is generally their backward linkage. Over the era it has developed to a huge
extent comparing from the time of independence till today. We are the 5th
ranking exporter of the
world. Our cement has two main characteristics which capture the international market 1) lowest
price 2) high quality. Even India imports cement from Pakistan rather consuming their domestic
cement due to high prices. We are strongest in terms of availability of raw material and geographical
locations. Only problem that hinders the growth of the country as well of the industry is the
mismanagement and corruptive practices of the people and positions involved.

3. INTRODUCTION
Pakistan cement industry was in a very poor condition at the time of independence with only
four plants the nation struggled to form a whole series of 29 plants distributed along northern and
southern region covering all the landlocked countries in exports of cement. Currently the industry
has been reported to have been under an accusation of ailing as per following statements taken from
Pakistan Today.
The fiscal year 2010-11 proved to be a nightmare for the cement sector as 80 per cent of the cement
manufacturers suffered huge losses on the back of stagnant local consumption. On top of this the
government failed to honor its commitment for payment of inland freight subsidy that could have
boosted exports. This was stated in a press release issued by All Pakistan Cement Manufacturers
Association (APCMA) reported on 5th July 2011.
While the local consumption also decreased by 8.24%, low consumption of cement mirrors the low
growth of GDP of the economy. Furthermore
A spokesman of the APCMA stated that continuous losses to cement industry are unbearable and
might jeopardize the servicing of Rs132 billion in loans the industry owes to the banking sector.
Cement industry has been incurring massive losses due to high cost of production, declining exports
and decrease in local demand of the commodity but the government ignored all the issues of cement
makers and no support was extended to the ailing industry, he highlighted.
In this report we will research whether it is or not. If it is so what are their root causes.

4. HISTORICAL TREND
POST INDEPENDECE
Pakistan inherited about four plants in 1947 with total capacity of 0.5 million tons. Industries were
nationalized by Mr. Bhutto in 1972. The cement was imported to meet the demands till 1976 to 1995
due to lack of engineering capabilities, imported machinery required huge investment. Currently
Pakistan has over 29 plants operating of which 24 are listed in the stock exchange while 4 are foreign
companies and 1 is establishing. The boost in the industry came along 1990 in the Zia ul Haq era
where the companies were privatized and the loans were made easy to access.
EXPORTS
In 2007 to 2008 there was a boom in the cement sector due to the increased construction
activities of both infrastructure and housing schemes. Investments were increased, loans were made
available and the purchasing power was strong.
2009 declination was mainly due to the increased energy costs, transportation costs increased due
to expensive fuels and overall production costs increased because of weakening of dollar. The most
alarming situations aroused for the manufacturers when higher tax was imposed on cement due to
evasion of government duties on supervised clearance systems.
Currently the cement sales declined in India due to non renewal of BIS certification (a quality
control license). Further the northern region lost almost all its exports through sea because of high
transportation costs
2007-2008 ↑ 140% 7.77 million tons
2008- 2009 ↑ 39% 10.75 million tons
2009- 2010 ↓ 0.89% 10.65 million tons
2010-2011 ( 7 months) ↓ 17.22% 5.19 million tons

5. TYPES OF CEMENT PRODUCED IN PAKISTAN
1) Ordinary Portland cement
2) Portland Blast Furnace Slag Cement
3) Sulphate Resisting Cement.
4) White cement
Ordinary Portland cement
Ordinary Portland cement is available in darker shade as well as in
light shades in Polypropylene bags of dfferent sizes with different
brand names to suit the requirement of users.
It is used in all general constructions especially in major prestigious
projects where cement is to meet stringent quality requirements; it can
be used in concrete mortars and grouts etc. Ordinary Portland cement
is compatible/consumable with admixture/ retarders etc.
Portland Blast Furnace Slag Cement
Sulphate resistant Cement’s best quality is to provide effective and
long lasting strength against sulphate attacks and is very suitable for
constructions near sea shores as well as for canals linings. It provides
very effective protection against alkali attacks.
Sulphate Resisting Cement
Slag cement, has been incorporated into concrete projects for
over a century to improve durability and reduce life cycle costs.
Among its measurable benefits in concrete are better workability
and finish ability, higher compressive and flexural strengths, and
improved resistance to aggressive chemicals
White cement
White Portland cement has essentially the same properties as
gray cement, except for color, which is a very important quality control
issue in the industry. It is readily available throughout North America.

6. CEMENT PRODUCTION
 Extraction of raw materials: This is done through quarrying process in which huge
rocks are crushed down to obtain limestone and clay the sole ingredients for
cement.
 Grinding and testing: After crushing the raw material is grinded and the
composition is checked.
 Pre-heated tower: The finely grinded raw material is then fed to the pre-heated
tower before sending to the rotary kiln. This saves energy as well as the raw material
is already in semi molten form when headed to the kiln.
 Rotary kiln: Here the semi molten raw material is further refined by the small steel
balls inside the kiln and heated to a temperature of 1450 degree Celsius causing to
form clinker.
 Silos: the clinker is then stored in silos ready for the shipments to carry it.

7. COMPETITION
Internal:
Punjab dominancy:
80% of the cement manufacturing firms are located in the north having a huge dominancy. The price
per bag is Rs. 395 per 50kg bag. This year almost all the orders have been cancelled due to the high
transportation costs through the sea. All that was needed was to provide a freight equalization
mechanism to units’ located at large distances from Karachi making for them to export greater
quantities of this high volume yet low value commodity.
South extravagance:
About 20% of the cement manufacturing firms are located in the south; price per 50kg bag is Rs. 370
less than the north showing the tough competition in the north.
International:
Internationally there is also a tough competition but the surviving factor of our cement is “low
price”. The following facts have been taken from Times of India.
CHENNAI: Builders in Chennai have started importing cement from Pakistan and a vessel
carrying the first consignment of 3,000 tones’ is expected to arrive here next week. The decision to
import cement from the neighboring country comes in the wake of domestic cement prices soaring
high.
Two months ago, builders in Kerala imported 400 tones’ of cement from Pakistan. "Satisfied with
the quality, we've decided to import more," said Abdul Aziz, CMD of Kochi-based Skyline
Builders. At a time when domestic manufacturers are selling at prices ranging from `235 to `265
a 50-kg bag, Pakistani cement will cost only `210 to `220 a bag on site for builders. "Six
builders are importing cement in the first lot and more will follow suit," said T Chitty Babu,
president of the Tamil Nadu chapter of the Confederation of Real Estate Developers' Association
of India (CREDAI). Babu's Akshaya Homes is among the largest consumers of cement in
Chennai market. "Our company is importing 1,250 tones’ initially. Five other builders are taking
300-500 tones’ each. In all, 20 CREDAI members in Chennai have expressed willingness to
import roughly 20,000 tones’ of cement per month from Pakistan. This will fulfill only 50% of
our actual demand," said Babu.

8. S.W.O.T ANALYSIS
Strengths
1) Availability of Raw material.
2) Imported machinery and plants in most of companies which provide better quality to over
all process.
3) Pakistan already established its position as an exporter
of cement and clinker in the region.
4) Availability of foreign investment and loans has also
played an important role in softening the demand for
bank credit. The moderation in fixed investment
demand in cement, construction and textile is more of
a reflection of the fact that these industries had already
expended their capacities in recent years and floatation
of debt instruments.
5) Pakistan cement industry is one of the largest exporters in Asia, major markets are of
Afghanistan and Iraq will be after peace.
Weaknesses
1) The stage of industrial development, in most of
the segments, is still at a very low of technology
and the existing industrial base is very narrow and
consists of very basic industries such as cement,
sugar, textile, cigarette, edible oil, fertilizer, soda
ash, caustic soda, PVC etc.
2) Since cement is a specialized product, requiring
sophisticated infrastructure and production
location. So most of the cement industries in
Pakistan are located near/ within mountainous
region that are rich in clay, iron and mineral
capacity. Structure of cement industry of Pakistan
is as such that there is not much stability to
buyers.
3) The customer has no choice at all to switch between two brands of cement due to cartel of
all of cement manufactures in Pakistan.
4) The freight charges are a massive 20% of the retail price.

9. Opportunities
1-The local cement industry faces high upfront fuel costs. In order to facilitate their conversion
to coal, which is widely available in the country, the government has given incentives for imported
plant and equipment for coal firing units.
2-The demand of Pakistani cement is expected to continue to grow at the rate of 20per cent for
about four years to come. It may then follow traditional growth rate of seven per cent per year.
Announcement of major dams will dramatically increase this demand.
Threats
1. Unanticipated increase in interest rates or less than expected demand growth might create
severe crises for the sector couple of years forward.
2. Lack of demand or depressed demand in future will prove to be lethal for the sector that has
just started to recover from the miseries of 90s. Lack of demand forced cement units to
operate at very low capacity utilization in nineties. There was a fierce competition among
cement manufacturers.
3. A price war was witnessed which ended up with no conqueror. Similar apprehensions exist
for the future when there will be plenty of excess capacity. Any hurdle in the growth of
cement demand may force the sector into the price war. Yet, we expect cement
manufacturers to act prudent and learn lesson from the history. Any mistake, similar to the
one made in the last decade, will again coerce the sector into the era where all are losers with
no winner.
4. Main component of the cost is fuel. Pakistan's cement industry has converted
their plants to coal considering it to be the cheapest fuel, but its price in international
markets has gone up by more than 300 per cent in the last one year, which directly relate
increasing the cost of production.
5. The demand of cement falls heavily during rainy weather in the country, which directly
affects the running cost of a unit. It is only the rising levels of cement exports, which are
sustaining the industry.
6. Instead of appreciating the marketing skills of
cement entrepreneurs to explore new markets for cement,
the industry is being pressurized constantly without
realizing that any reduction in cement exports from
Pakistan will not only deprive the country of foreign
exchange ($2 billion this year), but will also result in losses
to the industry.
7. The burden of increased input costs has to be borne by
the consumers. It is only the government, which can
provide relief to the consumers by cutting down
or abolishing the central excise duty.

10. BUDGET 2011- 2012
KARACHI:
Fiscal 2011 was a year to forget for cement manufacturers as sales and profits
plummeted, according to InvestCap.
The government’s lethargy in focusing on developmental activities due
to a 77 per cent decline in Public Sector Development Programme,
the devastating floods coupled with 27 per cent increased in cost of
coal hampered the industry, according to an InvestCap research note.
However, an allocation of Rs710 billion for PSDP and a seven per
cent decrease in the price of coal is expected to aid in the industry’s
revival
Expected budgetary measures
• PSDP allocation of Rs280 billion to the federal and Rs430 billion
to the provincial will bode well for the sector. The main factor is how much of the allocation is
utilized. The Recent trend has shown 24 to 40 per cent utilization, anything above the level of
fiscal 2011 should be considered a positive, and adds the research note.
•Federal Excise Duty is expected to remain at Rs700 per ton and Special Excise Duty at the
current level of 2.5 per cent due to the government’s escalated revenue collection target of Rs1.9
trillion.
Outlook and recommendation
Sales fell nine per cent to 25.7 million tons in the first ten months of fiscal 2011. Reconstruction
across the country following the floods will revive the much dampened cement demand, says the note.
This is expected to provide the industry with improved profitability as prices in the local market are
better than export prices. On the whole, the upcoming budget is expected to be neutral for the
industry, says the note.
Published in The Express Tribune, May 27th
, 2011

11. RECOMMENDATIONS
The Cement Industry of Pakistan is one of the industries which is in a better state of affairs
compared to other industries. The demand for cement is high both locally
&abroad. The future prospects for its augmentation are bright & optimistic. Were
commend the following measures to improve the industry further so that it’s production & export
can be increased for bringing foreign exchange in to the Pakistan
1. Special Rebate should be given to the Cement exporting companies
2. Import Duties should be very low on the import of machinery & other equipments
required for commencing a Cement Manufacturing Plant so that more companies enter the
Cement Market
3. The prices of cement currently are very high & the demand for cement is very high too b/c
more & more people are moving from villages to towns creating more demand for housing
projects. The Construction industry wants to buy more cement but it cannot buy cement at a
high price b/c people are not ready or cannot afford houses at high prices. Also due to
population rise there is a increasing demand for more houses but since the prices of cement
are high; Construction Companies are redundant to make houses at high prices. The
problem with Construction industry is that if they buy cement at a high price; they
would build houses at expensive prices too, considering their own profit margin also but a
major chunk of people cannot afford houses at expensive
prices. Therefore cement prices should be brought down substantially &immediately.
4. MFI (Most Favored Industry) status should be initiated by the Government &Cement Indus
try of Pakistan should be given MFI status in order to boost production & export b/c our
Cement Industry has a great potential to grow in the future
5. Pakistan should try to save money on the import of furnace oil; which would reduce the
price of cement per bag & increase its demand locally
6. The power shortage affects every industry including Cement. Steps should be taken to make
more small dams’ because a large dam like Tarbela takes almost ten years to complete. Import power
stations from China & Iran at cheaper price, low dependence on thermal power which is costly & Special
Consideration should be given to Industrial Units with regards to Load Shedding which happens
almost throughout the year.

12. CONCLUSION
With the analytical data and facts at hand we would conclude by saying that yes our country is
growing yet at a slow pace and that cement industry is the core of this growth. The only factor that is
causing this slow pace is the corruptive practices of the people themselves and the aim of only
satisfying their business needs rather than satisfying their role for this country. We are a country rich
in natural resources, fuel and land needed for the setup of such an industry but we do not know how
to utilize it properly and efficiently. We are blessed with such and ideal geographical location that we
can export to all the landlocked countries around us.

13. CURRENT EXPORT STATEMENT
|-----------------------2010-2011-----------------------|
Months |----------Cement----------| |--
Clinker-
-|
Total %age
Afghanistan India Other
(Sea)
(Sea) Growth
August 426,230 4
3,965
4
19,348 3,873
8
93,416
-5.49%
September 259,920 3
3,604
2
97,446 32,000
6
22,970
-
24.16%
October 529,590 4
3,436
3
72,094 2,800
9
47,920
-
15.35%
November 355,939 3
3,377
2
77,166 18,166
6
84,648
-
10.72%
December 372,751 3
1,925
2
99,604 4,027
7
08,307
-
10.78%
January 181,875 5
7,028
2
88,602 38,347
5
65,852
-
17.22%
February 372,048 4
8,259
2
43,479 45,720
7
09,506
6.22%
March 458,765 6
2,033
2
94,223 4,671
8
19,692
-
11.83%
April 504,006 8
4,198
3
43,836 296
9
32,335
-0.68%
May 471,782 5
7,433
3
46,452 288
8
75,955
-8.51%
June
Total 4,255,704 52
3,902
3,5
95,626 159,873
8,5
35,104
-
12.52%
Growth (%) 16.96% -
19.81%
-
30.95%
-
37.88%
-
12.52%

14. CAPACITY STATEMENT
North
Zone
As on June - 2011
Sr. Name Of Unit Operational
Capacity
No. Clink
er
Cem
ent
1 Askari Cement Limited - Wah 1,0
50,000
1,1
02,500
2 Askari Cement - Nizampur 1,5
00,000
1,5
75,000
3 Bestway Cement Limited - Hattar 1,1
70,000
1,2
28,500
4 Bestway Cement Limited - Chakwal 3,4
28,571
3,6
00,000
5 Bestway-Mustehkum Cement Limited -
Hattar
1,0
35,000
1,0
86,750
6 Cherat Cement Company Limited-
Nowshera
1,0
00,000
1,0
50,000
7 Dandot Cement Limited - Jehlum 4
80,000
5
04,000
8 Dewan Hattar Cement Limited - Hattar 1,0
80,000
1,1
34,000
9 D.G.Khan Cement Limited - D.G.Khan 2,0
10,000
2,1
10,500
10 D.G.Khan Cement Limited - Chakwal 2,0
10,000
2,1
10,500
11 Fauji Cement Company Limited - Fateh
Jang
1,1
10,000
1,1
65,500
12 Fecto Cement Limited - Sangjani 7
80,000
8
19,000
13 Flying Cement Limited - Lilla 1,1
40,000
1,1
97,000
14 GharibWal Cement Limited - Jehlum 2,5 2,6

15. 50,000 77,500
15 Kohat Cement Company Limited -
Kohat
2,5
50,000
2,6
77,500
16 Lucky Cement Limited - Pezu 3,7
25,714
3,9
12,000
17 Maple Leaf Cement Factory Limited -
Daudkhel
3,5
10,000
3,6
85,500
18 Lafarge Pakistan Cement Company
Limited - Chakwal
1,9
50,000
2,0
47,500
19 Pioneer Cement Limited - Khushab 1,9
33,571
2,0
30,250
Sub Total (North) 34,0
12,857
35,7
13,500
South
Zone
1 Al-Abbas Cement Limited - Nooriabad,
Dadu
4
50,000
4
72,500
2 Attock Cement Pakistan Limited - Hub
Chowki, Lasbela
1,7
10,000
1,7
95,500
3 Dewan Cement Limited - Dhabeji 7
50,000
7
87,500
4 Lucky Cement Limited, - Indus
Highway, Karachi
3,4
28,571
3,6
00,000
5 Thatta Cement Limited - Thatta 3
00,000
3
15,000
Sub Total (South) 6,6
38,571
6,9
70,500
Grand Total (North+South) 40,6
51,428
42,6
84,000
Fauji Cement 2011-2012 2,1
60,000
2,2
68,000

16. Projected 2011-2012 42,8
11,428
44,9
52,000
IMPORT STATEMENT
|----------------2010-2011----------------|
Months North South Total Growth(%)
July 1,445,003 304,846 1,749,849 -0.33%
August 1,238,906 250,338 1,489,244 -25.49%
September 1,176,859 201,665 1,378,524 -21.38%
October 1,634,975 339,412 1,974,387 2.88%
November 1,461,401 269,854 1,731,255 1.16%
December 1,479,144 306,309 1,785,453 -5.21%
January 1,515,182 392,171 1,907,353 -16.13%
February 1,385,056 393,287 1,778,343 0.04%
March 1,774,255 448,807 2,223,062 -3.76%
April 1,646,327 401,091 2,047,418 2.78%
May 1,490,623 388,628 1,879,251 -9.82%
June
Total
16,247,73
1
3,696,40
8
19,944,13
9 -7.06%
Growth(%
) -11.65% 20.46% -7.06%

17. REFERENCES
 www.apcma.com
 http://www.oppapers.com/essays/Pakistan-Cement-Industry/304388
 http://www.cement.com.pk/cement-services/spares-for-cement-
plant/casting.html
 http://www.scribd.com/doc/46480216/final-ppt
 http://www.managementparadise.com/forums/managerial-economics/48093-
ppt-cement-industry.html
 http://pakistan360degrees.contentcreatorz.com/cement-industry-of-pakistan/
 http://www.pakistantoday.com.pk/2011/07/apcma-highlights-cement-industry-
problems/
 http://tribune.com.pk/story/176501/budget-2011-12-whats-in-store-for-the-
cement-sector/
 http://www.scribd.com/doc/55574822/Cement-Industry-of-Pakistan-An-
Insight