Home Business Cement Industry Should Increase Stocks to Match Demand: Abdul Razak Dawood

Cement Industry Should Increase Stocks to Match Demand: Abdul Razak Dawood

cement sector

News Desk |

For the upcoming mega-infrastructure projects, Pakistan’s major cement stakeholders have been asked by Adviser to Prime Minister on Textile, Commerce, Industry, Production and Investment Abdul Razak Dawood to build up their stocks. In a meeting held with the All Pakistan Cement Manufacturers Association (APCMA) in Islamabad, Mr. Dawood requested a review of the supply and demand situation and cement prices in the country.

Cement company officials provided positive responses where domestic demands were being met while exports were also rising with more growth expected in the final quarter for the current fiscal year. Pakistani companies have also been using sea routes more often with clinker exports going into where both prices and demand have gone up.

GJ Khan Cement is looking forward to increasing its production capacity from 26-28 million tons to 72 million tons plus within the next two to three years.

Representatives of the industry have repeated requests for tax cuts since coal, gas, and electricity prices have increased causing a rise in the production cost. The industry is absorbing the impact of surplus costs through floating mechanisms and is not charging customers more. According to a leading official from the industry, companies are already producing and expanding at optimal levels.

South-based cement mills have contributed around 18% in gross sales and exports at around 6.087 million tons for domestic markets and 1.236 million tons exported in the 2nd quarter of FY18. Pakistan’s 24 cement mills are capable of producing 49 million tons of cement and 47 million tons of clinker annually. Most local manufacturing cement factories have invested heavily in additional storage given the demand increase due to China-Pakistan Economic Corridor projects with an aggregate cost of $57 billion.

Read more: Cement Industry rebounds as exports rise

DG Khan Cement ranks as the third biggest cement manufacturer in the country at a daily capacity of 14,000 tons. Currently, it has four cement plants; two located in Dera Ghazi Khan, one in Chakwal and a new one in Hub that became operational this year. GJ Khan Cement is looking forward to increasing its production capacity from 26-28 million tons to 72 million tons plus within the next two to three years. The company is also exporting into Bangladeshi markets as well as other countries.

Dawood stressed the need for expanding capacity for upcoming prime minister’s housing scheme and dam construction projects. A representative from the commerce sector spoke about Dawood’s main concern being the decline in production alongside growing inflation rates and energy prices. However other industry officials provided assurance that production would rise in response to the growing demand.

Given the price difference between domestic cement and exported cement, South companies are probably investing in export grade storage facilities, being strategically closer to the sea routes leading to offshore markets.

According to research made Farheen Irfan, a research analyst at Elixir Securities, it would not be wise for the industry to start selling cement at a higher price than the one it is currently being sold at. If demand is expected to rise to offset low production levels, the industry could risk decline rather than an increase in demand by increasing commercial prices. However, she also pointed out that companies were exporting cement at such low prices at times simply breaking-even.

While Pakistan’s cement sector is distributed between North and South regions which are currently expanding in the Balochistan province, the North region is mostly situated in the Salt Range and Potohar Region of Northern Punjab. Some of the Cement production facilities came to the limelight when ever-vigilant CJP Saqib Nisar took notice of illegal extraction of deep groundwater by expanding cement factories.

Read more: Pakistan Cement Industry stays strong as Cherat & Fauji post profits

Efforts have been mounted to invest in environmentally adequate methods for extraction, expansion and waste disposal. These efforts will be backed by the relevant legislation and regulatory committees, with decisions that go into effect immediately as decided during a committee meeting, presided over by Chief Minister Shahbaz Sharif.

The committee has approved a feasibility study by international consultant Brian L O’Brien in a first-time decision to be ever taken by any provincial government. A plan to highlight negative and positive mining areas for setting up cement plants (in the Salt Range and the Trans-Indus Ranges) considering the availability of raw material, sustainable water sources, waste disposal facilities, and cost-efficient logistic routes will be implemented.

The country would also be hosting INTERCEM from November 12 for three days where global cement industry specialists and representatives are expected to interact at the behest of the APCMA.

The extraction of groundwater by the cement industry is of major concern to the livelihoods of local residents, officials said. The enforcement of decisions was made in light of the findings of this feasibility study by CM Shahbaz Sharif with orders of groundwater to only be used for human consumption. Established companies will have to arrange for water from the Indus River as per original commitments made with the owners.

Judging by the onset, the cement industry can be foreseen picking up the pace especially in the South. Given the price difference between domestic cement and exported cement, South companies are probably investing in export grade storage facilities, being strategically closer to the sea routes leading to offshore markets. It would make sense for Pakistan to make up for the production deficit through exports now that the Balochistan chapter is coming online.

Read more: Cement industry set to be boosted by Diamir Bhasha Dam construction

The country would also be hosting INTERCEM from November 12 for three days where global cement industry specialists and representatives are expected to interact at the behest of the APCMA. The North has almost always dominated the cement sector and currently still does, but a balance might be reached soon.

It is interesting enough that Pakistan’s myriad of problems are somehow mostly connected. But even more interesting is that in this manner such vital issues may come to the fore and receive appropriate coverage. It is also obvious how it is quite necessary for both the new government and the incumbent local governments to coordinate efforts towards a more economically, socially and environmentally sustainable future.


LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.