The report gives comprehensively the synopsis of the Pakistan Cement Industry. At first a detailed introduction has been provided giving insight into the development of the cement industry over the years. The main facts regarding the cement industry have been mentioned such as the total demand, production, capacity utilization, the industry sales etc. Also, the performance of the top four companies of the industry have been looked into and basis of these four companies the industry performance has been evaluated.
The report gives a full-fledged insight on the raw materials squired, utilities used, types of processes of manufacturing cement, the types of cement produced and other information is also mentioned. Pakistani cement industry produces four major types of cement, names of all these and their details is also available in the report. Different analysis has been applied on the industry. The Porter’s five forces analysis and the SOOT analysis are the two main analytical tools implemented.
Also, the current highlights regarding the happenings of the cement Cement Industry in Pakistan By shrapnel 4 industry is facing and relevant recommendations. The cement industry in Pakistan has come a long way since independence when the country had less than half a million tons per annum production competence. Prevarication and successful price decontrol in 1991-92 heralded a new era in which the industry had reached a level where surplus production was achieved after meeting local demand in 1997.
Due to this affirmative progress many investors were attracted due to cheap and abundant availability of raw materials and increasing local demand for cement consumption also encouraged investment for further expansion of production capacity of their respective units. CURRENT SCENARIO Currently the cement sector is utilizing only fifty per cent of its installed production capacity of 45 million tones approximately since the local consumption of cement is stagnant for the last several years. Cement sales have been stagnant at 22 million tons per year for the last three years against production capacity of over 43 million tons.
The low national demand has caused the industry to be unable to absorb the total installed capacity. This is forcing Manufacturers to dispose of their product at loss in the domestic market. So there is a need to explore foreign markets to utilize their full capacity. As of the last quarter of FYI 12 only two cement mills that are located near sea port are exporting cement and earning profit of Pros. 4 billion while the remaining mills that are unable to export through sea have booked loss of over Pros 10 billion during last fiscal.
The Cement sector of Pakistan is regrettably showing a decline from last few years, which was growing showing an increasing trend from last few decades. Many facet, variables and things have contributed to this decline in growth. A realistic view on to the cement sector could have given many other impressions but the local view on the cement sector’s performance shows that, it has offered a lot. Keeping this in mind, we can analyze that economic situation might exasperate which will affect the production and exports negatively.
The analysis of this sector from various contexts through thorough research, to some extent verified and helped us to sort out the causes which are listed down. These causes are high cost of energy, heavy taxation, high freight charge, low spending upon STEPS, fluctuating interest rates, declining international market share political instability, law and order situation, economic constraints to retrieve back to original situation and international market competitiveness. Looking into all major causes, recommendations are given in way forward which is to the best of our understanding and capacity for the Cement Sector.
production capacity: Now we’ll be analyzing the performance of the cement sector from 1990-2012 based on the data available. Starting from 1990, the production capacity (Millions of Tones) were 8. 89 which did not grow till 1993, while in 1994 grew by 1. 77% to 9. 48, then by 12. 43% in 1995 and stayed constant in 1996. In 1997 and 1998, we can see that 22. 91% and 24. 8% respectively. No solid data is available to explain the reason why it grew so sharply.
From 1999 to 2005, production capacity experienced fluctuations which were not so effective. And 2007 again shows a sharp increase in production capacity of 46%, this was due to the subsidies and tax relief given by the government. This growth then started decreasing in 2011, which shows a negative growth of 6. 53% due to unstable economic conditions. Local Dispatches: Local dispatches (Millions of tons) shows how many tons of cement been dispatched from the factories to local retailers or how many orders, in terms of tones has been imploded and sent to local dealers.
So, from 1990 to 1995, the data shows a stable increase from 3% – 6%. A sharp increase was experienced in 1996, due to the economy, which was developing and constructions and roads were getting built. From 1997 to 2002, again it shows an average increment of 2. 7%. And in 2003 as Mustard’s government took over and started undertaking the development decisions, the dispatches increased to and went as high as 23% in 2007. And due to bad economic conditions and low development, it shows negative growth of 6. 64% in 2011. However, increased by a million ton in 2012.
Exports: Now we will look at the exports (Millions of Tones) of the cement sector. The data available to us, of exports is from 2002 to 2012. In 2002, cement sector exported . 107 million tons of cement. The next year, in 2003, it increased by 342. 53%, then by 137% in 2004 and kept increasing till 2010 where it shows a negative growth in the exports of 3. 03% and again the next year shows a negative growth of 1 1. 47% and since then its declining and right now it’s at a -4. 38%. Total Dispatches: “Total dispatches” is the summation of the local dispatches and the total exports.
It wows the overall performance of the cement sector keeping in mind the total production and dispatches. From 1990 to 2002, it’s same as local dispatches, but in 2003 shows a 15. 21% increase as exports started and reached to a massive 30% increment in 2007 and its still increasing. Right now, it stands at 3. 43%. The Government has been providing freight subsidy on many items, for cement sector, in fact, it was announced in last fiscal year at the rate of 35 per cent for export withheld. The cement manufacturers have not yet received any payment from State Bank of Pakistan neither any approval letter from ADAPT.
As of date, cement industry has filed claims for freight subsidy of over Pros 270 million to ADAPT. There is a lot of potential to increase exports through sea. Cement manufacturers could get export orders by sea, provided the issue of high inland freight cost from the northern region is addressed. The government’s fulfillment of its pledge of freight subsidy would enable all the cement manufacturing units to export their surplus capacity and earn substantial foreign exchange for the country. Also, the domestic demand has increased after a tough FYI 1 when the country was hit by the Great Floods of 2010,