The objective of the research will be wow-fold: 1 . To determine Industry dynamics by evaluating historical performance and background as well as market structure and degree of competition. 2. To identify factors that drive growth and capacity and expansion cycles. Hypotheses for this research study are developed as follows: Hypotheses 1 : The cement industry follows an oligopolies market structure. Hypotheses 2: The cement industry will follow economic trends of the country.
The research methodology largely employed secondary research for data collection and analyses utilizing industry research reports, publicly available financial tenements and literature on the industry available online. A minor part of primary research entailed gaining insight on the industry future outlook through one-on-one interviews with industry experts. Analysis on the Cement Industry in Pakistan By samizdat’s Pakistanis cement industry has shown tremendous progress since Independence.
In 1947, there were only four operational cement units in West Pakistan with the total production capacity of approximately half a million tones per annum. Demand during the same period was estimated at over a million tones. The industry experienced gradual growth as five plants were set up in the sass’s with a total capacity of 2. 8 million tones with four more set up in the sass’s. These were the Baby years when the construction industry went through a boom as demand grew because of an expanding economy and by 1969 the cement industry of Pakistan had 14 operational cement plants with an annual rated capacity of 3. 3 million tones.
Following this expansionary phase of the cement industry, the Economic Reforms Order of 1972 brought about nationalization of the private sector plants and resulted in a relatively stunted growth of the industry in the subsequent years. Nationalization merged state owned plants to form the State Cement Corporation of Pakistan (SCUP) and this “State Cement era” lasted from 1972 to 1992. During these three decades, production increased from 3. 5 million tones to a mere 8. 4 million tones by 1992 and Pakistanis cement requirements were largely being met through exports which had started in 1977 and continued till 1995.
Government policy moved towards denationalization in 1977-1988 and emphasis was placed on housing and construction. To meet demand in the sass, the government allowed 7 more units to be set up by the private sector housing a total capacity of 2. 4 million tones and 4 plants were set up by the SCUP in the public sector. By the end of this period 24 cement plant operated in Pakistan. However, there were enormous price differentials between private and public sector as the SCUP fixed cement prices on the lower side for the public sector companies.
Through to 1995, local capacity was unable to fulfill local demand particularly in the north and Pakistan continued to import cement in huge quantities to satisfy need and some plants closed down in between. Prices in the sass were, therefore, high as a result of import costs and shortage of local cement. With projections for accelerated growth in demand in the world and local economy, five more plants were set up to gratify cement requirements locally. However, the local demand did not grow as expected during 1995 to 2000 and the cement sector experienced poor growth rates of 8% per annum.
