Cement industry worried as raw material evaporating fast
Raw gypsum is being exported in big quantities particularly to India
Raw gypsum is being exported in big quantities particularly to India. PHOTO: REUTERS
LAHORE:
As cement manufacturers step up efforts to give a boost to their production capacity in the wake of growing domestic demand, their primary concern is the fast evaporating reserves of gypsum, a raw material used in cement production.
They are complaining about unchecked export of raw gypsum, primarily to India, at extremely cheaper rates and in bulk quantities.
Cementing the industry’s growth
“We believe that gypsum reserves will be exhausted in about seven years, which will pose a challenge to the cement manufacturers in the future,” said Khalid Mahmood, General Manager of DG Khan Cement plant in Khairpur, while talking to a group of journalists.
Indians are importing around 1,000 tons of raw gypsum every day via the Wagah border at prices ranging between $20 and $22 per ton and are using it for value addition in their products.
“If these reserves are consumed, then Pakistan will have to import the raw material to meet the rapid rise in demand from the construction sector,” Mahmood said, suggesting that the government should stem the flow of exports.
Cement industry: Sector likely to post highest-ever sales
“This will leave gypsum reserves for a much longer period for the domestic industry as it constitutes only 5% of the inputs used in producing a cement bag.”
Pakistan’s annual cement production stands at 45.6 million tons, of which DG Khan Cement churns out 4.2 million tons or 9% of the total.
DG Khan Cement was established under the management control of State Cement Corporation of Pakistan in 1978 and started commercial production in April 1986 with 2,000 tons of clinker per day.
After acquisition by the Nishat group in 1992, the company was listed on the stock exchange the same year.
At present, it has two plants, one in Dera Ghazi Khan and the other in Khairpur, each having production capacity of 6,700 tons per day.
The company is increasing the capacity by establishing a plant in Hub, Balochistan, which will produce 9,000 tons of cement per day. It enjoys an 11% share in the local market and the share in exports stands at 9%.
Positive-trajectory: Cement sales reflect good tidings ahead
Like other sectors, this industry is also under pressure due to high taxes and transportation costs. Royalty on different raw materials has also been increased.
According to Mahmood, the government has pushed up the royalty on limestone to Rs60 from Rs5 per ton. The Khairpur plant alone consumes around 10,000 tons of limestone daily. Excise duty on clay, another raw material, has also gone up.
“For producing a cement bag, the manufacturer requires 12.5 kg of imported coal, consumes 4.5 to 5 kilowatts of electricity, needs a sack costing Rs23 and pays sales tax in the range of Rs750-1,000 per ton. After adding the depreciation cost, wages and other expenses, a bag of cement costs around Rs450,” Mahmood said.
Transportation of the commodity via road from Khairpur to Lahore costs Rs50.10 per bag.
In fiscal year 2014-15, DG Khan Cement posted an after-tax profit of Rs7.62 billion compared to Rs5.97 billion in the previous year.
Mahmood put per capita cement consumption in Pakistan at 150 kg, far below the world average of 500 kg. “If the consumption rises at least 100%, then it could be a challenging task to meet the demand,” he said.
Published in The Express Tribune, December 19th, 2015.
As cement manufacturers step up efforts to give a boost to their production capacity in the wake of growing domestic demand, their primary concern is the fast evaporating reserves of gypsum, a raw material used in cement production.
They are complaining about unchecked export of raw gypsum, primarily to India, at extremely cheaper rates and in bulk quantities.
Cementing the industry’s growth
“We believe that gypsum reserves will be exhausted in about seven years, which will pose a challenge to the cement manufacturers in the future,” said Khalid Mahmood, General Manager of DG Khan Cement plant in Khairpur, while talking to a group of journalists.
Indians are importing around 1,000 tons of raw gypsum every day via the Wagah border at prices ranging between $20 and $22 per ton and are using it for value addition in their products.
“If these reserves are consumed, then Pakistan will have to import the raw material to meet the rapid rise in demand from the construction sector,” Mahmood said, suggesting that the government should stem the flow of exports.
Cement industry: Sector likely to post highest-ever sales
“This will leave gypsum reserves for a much longer period for the domestic industry as it constitutes only 5% of the inputs used in producing a cement bag.”
Pakistan’s annual cement production stands at 45.6 million tons, of which DG Khan Cement churns out 4.2 million tons or 9% of the total.
DG Khan Cement was established under the management control of State Cement Corporation of Pakistan in 1978 and started commercial production in April 1986 with 2,000 tons of clinker per day.
After acquisition by the Nishat group in 1992, the company was listed on the stock exchange the same year.
At present, it has two plants, one in Dera Ghazi Khan and the other in Khairpur, each having production capacity of 6,700 tons per day.
The company is increasing the capacity by establishing a plant in Hub, Balochistan, which will produce 9,000 tons of cement per day. It enjoys an 11% share in the local market and the share in exports stands at 9%.
Positive-trajectory: Cement sales reflect good tidings ahead
Like other sectors, this industry is also under pressure due to high taxes and transportation costs. Royalty on different raw materials has also been increased.
According to Mahmood, the government has pushed up the royalty on limestone to Rs60 from Rs5 per ton. The Khairpur plant alone consumes around 10,000 tons of limestone daily. Excise duty on clay, another raw material, has also gone up.
“For producing a cement bag, the manufacturer requires 12.5 kg of imported coal, consumes 4.5 to 5 kilowatts of electricity, needs a sack costing Rs23 and pays sales tax in the range of Rs750-1,000 per ton. After adding the depreciation cost, wages and other expenses, a bag of cement costs around Rs450,” Mahmood said.
Transportation of the commodity via road from Khairpur to Lahore costs Rs50.10 per bag.
In fiscal year 2014-15, DG Khan Cement posted an after-tax profit of Rs7.62 billion compared to Rs5.97 billion in the previous year.
Mahmood put per capita cement consumption in Pakistan at 150 kg, far below the world average of 500 kg. “If the consumption rises at least 100%, then it could be a challenging task to meet the demand,” he said.
Published in The Express Tribune, December 19th, 2015.