DG Khan Cement’s Hub plant to come online by December this year

May not result in major price war since demand in south is increasing

Salman Siddiqui July 18, 2017

KARACHI: DG Khan Cement’s latest manufacturing plant, which would be Pakistan’s largest in terms of installed capacity, will officially begin production by December 2017, reported a local brokerage house on Monday.

The plant at Hub, owned by Mian Mansha’s DG Khan Cement, is being constructed at an estimated cost of $300 million.

However, Shajar Capital stated in its report that the plant may not result in a major price war or eat up a significant market share of competitors since it would largely cater to the rising demand of cement in Gwadar-related mega projects and housing schemes in the southern region (Balochistan and Sindh).

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Shajar Capital said it along with its clients paid a visit to the construction site to assess the process of its much-awaited green field expansion at Gaddani, Hub which “as per the project management is expected to come online by the end of calendar year 2017.”

The company has set the target to complete its civil work by September 2017 and move into the testing phase in order to ensure project commissioning by December 2017, it said.

The brokerage house added “the new line having a clinker capacity of 9,000 ton per day is the largest single facility (being) set up in Pakistan,” the house added in a brief to its clients.

“Development of Gwadar, initiation of HUBCO coal based power plant and revival of Parco’s refinery plant at Khalifa Point are anticipated to spur cement demand going forward in the region and also bring further development along this area,” it said.

The cement maker is a listed firm at the Pakistan Stock Exchange. Its share price increased 0.37%, or Rs0.72, to Rs194.11 with a volume of 486,100 shares on Monday.

Arif Habib Limited’s analyst Tahir Abbas added the project would cater to the rising demand in the “southern region [which] is operating at 95% capacity utilisation.

“It will definitely impact the southern market in terms of utilisation,” he said.

Feasible export point

Historically, Abbas said, many cement manufacturers in the southern market have been exporters as well. “Export is the prime objective of the plants being operated under the long-term vision in the south,” he said.

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The exports are on a decline for the last couple of years and higher local demand has absorbed external shocks. “But, obviously, in the longer run, things would not remain the same. The trend [export] would change in the next five-seven years,”

Hub is a good location for manufacturing cement and then exporting via Karachi Port or Gaddani which is yet to be developed over a period of time, he said.

This is the first expansion project to become operational this year. The others of the total new capacity of 25.5-26 million ton would come by 2020-21.

Published in The Express Tribune, July 18th, 2017.

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