Cement industry eyes new destinations as exports fall

Cement industry leaders identify Iraq, Sri Lanka and African countries as potential export destinations.

KARACHI: Cement industry leaders have identified Iraq, Sri Lanka and African countries as potential export destinations during the current fiscal year.

Pakistan had the capacity to produce 44.88 million tons of cement by the end of fiscal year 2009, though it only produced 33.22 million tons due to lower demand and increased losses due to the pressure placed on pricing, according to a research conducted by The Vision Corp.

Cement exports have shown gradual increases since 2001 but the current fiscal year saw negative growth in terms of volumes. However, it is believed that Pakistan has a total export potential of 15 million tons this fiscal year and the research report has attributed the country’s prominence in the international cement market to relatively lower prices. Muhammad Ali Tabba, CEO of Lucky Cement – the largest manufacturer and exporter of cement in the country – reasoned that the recent decline in exports was due to Gulf markets becoming self-sufficient. “Gulf countries were a major market earlier, when Lucky Cement alone was providing them with one million tons per annum,” he explained.

Declining demand for imported cement in India has also played a significant role in the drop in exports. The Indian cement industry witnessed a growth of 10 per cent in the last three years, which has overcome the demand and supply gap, leaving little room for imported cement from Pakistan.

Potential destinations

However, Iraq has provided Pakistan with a potential market, as demand is almost double the domestic production of seven million tons. Companies have shown interest in the development of infrastructure in 2010, which is likely to push up demand further, while no changes are expected in supply.

Demand in Sri Lanka is also expected to grow by seven per cent to cater to the needs of reconstruction in war-torn areas, while the resettlement and rehabilitation of displaced Tamils in other areas will increase demand in general. Cement import growth was recorded at 486,000 tons, representing an increase of 12.55 per cent from the preceding year.

Exporters have also targeted African markets, which include South Africa and East African countries. South Africa consumed 14.99 million tons of cement in 2008 and this figure is expected to reach 23.11 million tons in 2015 as a result of the government’s plan to deliver 630,000 homes every year.

East African countries such as Uganda, Kenya and Tanzania are likely to provide an outlet for exporters to supply their products. Since May 2010, the cement industry in these countries has been dominated by Pakistan. Around 10 per cent of the total demand in Tanzania was met through cement imported from Pakistan due to logistics problems, high costs of production and power shortages that trouble Tanzanian manufacturers.

Published in The Express Tribune, February 6^th, 2011.