Cement demand: Industry utilises highest capacity in almost a decade

Plans investment of up to $1 billion in expansion of plants over three years

Our Correspondent April 13, 2016

KARACHI: Pakistan’s cement industry is going through its golden period and it is expected to grow at the same rapid pace in the next couple of years, remarked All Pakistan Cement Manufacturers Association Chairman Muhammad Ali Tabba.

“Every industry experiences such a time. This patch for the cement industry is like what the banking industry witnessed in the past decade,” he said while talking to media on Tuesday.

Owing to a construction boom in the country, the capacity utilisation of cement plants is improving and is now close to 85%, which is the highest in a decade. Of the total installed capacity of 45 million tons, the industry’s surplus capacity stands at just 5.87 million tons - the lowest in the last nine years.

Anticipating a further growth in demand, cement companies are aggressively engaged in the expansion of plants.

“The combined investment of cement players in the expansion of their units ranges from $700 million to $1 billion over the next three years,” said Tabba in reply to a question.

Cherat Cement, Attock Cement, DG Khan Cement and Lucky Cement have already announced expansion plans and all these plants will come online in the next three years.

Tabba voiced hope that capacity utilisation would cross 90% and then go beyond that in the next one to two years.

Projecting a rapid growth in sales, he stressed that the industry might have to divert six million tons of exports to the domestic market once the industry started utilising 100% of capacity.

“With a continued rise in demand, it is natural for the industry to think beyond the next few years when the utilisation of capacity will hit 100%,” he said.

Tabba, however, expressed dismay over the way media painted the picture of the cement industry.

“The industry has been accused of profiteering, but critics forget that businesses need to make money for shareholders. Businesses support the economy by paying taxes and duties to the government, but this is being portrayed as a bad thing, which should not be the case,” he said.

He asked the government to reduce gas prices, saying a persistent increase in energy prices and other such factors had pushed up the cost of doing business compared to regional competitors.

Gas prices for domestic consumers and fertiliser plants had been slashed, but other industries were still bearing a heavy cost, he pointed out.

He hit out at the government’s indifference to rampant smuggling along the Pakistan-Iran border. About 500,000 to 700,000 tons of cement, he said, was smuggled into Pakistan from Iran annually, causing a loss of Rs10 to Rs20 billion in taxes to the national exchequer.

Smuggled Iranian cement is now available in different parts of Punjab. Historically, Pakistani industries had long been affected by the illegal flow of goods under the Afghan transit trade and now smuggling along the Pakistan-Iran border was fast becoming the second biggest threat to the manufacturing sector, he said.

Published in The Express Tribune, April 13th, 2016.

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