Pakistan ready to rock the world cement in a big way

Published on 17th Oct, Edition 42, 2016

 

Development under CPEC will transfer goods and commodities worth billions of dollars every year

Cement is the chief essential constituent of construction activity. The current demand-supply situation in the cement sector indicates excess cement production capacity in the country. During the past one decade, the cement manufacturing has been buoyant in Pakistan and the industry has shown tremendous growth in recent years. Owing to the increasing local and export demand due to rising construction activities and regional cement shortages, Pakistani cement sales jumped to exceptionally high.

Due to the shortage of cement in the region and rising demand from India and North African countries, Pakistani cement manufacturers are poised to benefit from the current cement boom in terms of high export price.

Presently, the total installed capacity of 28 cement plants in the country is 17.312 million tons. The industry witnessed a steady growth rate of 8 percent until 1994. Before 1994, the country was facing shortage of cement that was met through imports. In 1999, the country’s total production was estimated at 10.384 million tons. In the past three years the cement industry has been facing a crisis situation. With a share of Rs40 billion per year in the GDP, the cement sector contributes Rs15-20 billion per annum to the national exchequer. Pakistan offers great opportunity to capture regional markets due to its geo- strategic location on the confluence of South, West and Central Asia.

The country is set to rock the world cement market by making its entry in a big way. The main Pakistani cement manufacturers including Bestway Cement, Lucky Cement, and D G Khan Cement have set up new plants for further expanding their production capacities. Pakistan produces four types of cements and the raw material- gypsum, limestone, clay/shale- used for cement manufacturing is found in abundance in the country.

The country plans to further enhance its production capacity and fully explore the major markets including India, Russia, UAE, Yemen, Sudan, Ethiopia, Algeria and other North African countries for the purpose.

 

Achievements

The cement export to Iraq, Iran, India, Afghanistan and UAE witnessed an exceptional growth in the past one decade. Major markets for Pakistan cement exports were Afghanistan and the UAE. The remarkable performance of cement sector was due to the enhanced installed capacity, which had more than doubled during last five years, as well as to the rise in local demand and strong external demand.

Pakistan has already been supplying cement to Afghanistan for the last many years. It has been the key player and a traditional supplier of cement in Afghan market. The cement units in northern areas of the country continued to feed the Afghan market by supplying up to 2.5 million tons. Like Afghanistan, Pakistani exporters have been exporting cement to the war-torn Iraq where the demand for cement has been higher for reconstruction work.

At present, India and China are enjoying a robust position in the regional markets as both countries are able to offer competitive prices. The cement manufacturers in China and India enjoy state subsidies for exports. The subsidies lower their costs of production.

Pakistan needs to offer local manufacturers the similar subsidies for exports to regional markets to make them competitive.

PAKISTAN’S CEMENT EXPORT POTENTIAL
COUNTRIES	Current Demand 1998	Demand Growth %	Local Production (metric tonnes)	Current Gap	Est. Gap in 2003	Remarks
Bangladesh	3100	8	200	2900	4400	No limestone
Sri Lanka	2000	1	500	1500	1600	Fast depletion of limestone reserves
Myanmar	2400	8	500	1900	3000	No major capital
Yemen	2800	10	1200	1600	1000	High growth rate
TOTAL	10300		2400	7900	10000
(SOURCE: Pakland Research Report)

Positive impact of CPEC

There are hopes being pinned for high growth of cement industry after the implementation of mega construction projects under $46 billion China-Pakistan Economic Corridor (CPEC). The rise in cumulative cement dispatches is solely attributable to rising export volumes as domestic demand has so far remained depressed.

With CPEC, the domestic demand will witness a sharp surge. The country’s cement industry has the capacity to meet the rising demand of cement for infrastructure projects under CPEC plan. The cement sector will surely get a boost from the implementation of multibillion dollar construction projects under CPEC.

Cement sector is likely to get a boost from the tremendous construction activity generated by multi-billion dollar infrastructure projects planned under the CPEC).

Gwadar port is the essential part of the $46 billion CPEC project. No doubt, a huge investment in infrastructure promises a brilliant growth of cement and steel industry of Pakistan. It will not be incorrect to contend that the CPEC project is going to be a game-changer for cement and steel sectors. The CPEC involves construction of highways, railways and energy pipelines connecting western China with Pakistan and the Persian Gulf. The two countries signed 51 deals worth billions of dollars mostly relating to the CPEC project.

Located at the crown of the Arabian Sea, Gwadar port in Balochistan will open up an energy corridor from Central Asia and the Gulf across Pakistan to western China. Gwadar free port project promises massive investment, greater generation of employment opportunities and more development projects in different sectors of provincial economy. Commerce, industry, trade and economic activities would receive a boost after the development of two-phased seaport in the province.

Gwadar port is of immense importance not only for trade with CARs but also for the development of Pakistan. Of course, Gwadar has the potential to become a hub of major economic and commercial activities in the region. There is a high need for establishing roads and warehousing facilities at Taftan, Chaman and Torkham borders in order to make full use of Gwadar Port. The future scenario necessitates the establishment of a strong, well-coordinated and metalloid highway and road and rail network spreading across the province and interlinking the major commercial centers in Balochistan. The CPEC project is perhaps the answer.

The development of road and rail links between the two provinces, Balochistan and Xinjiang, will give distinction to Gwadar port of becoming the gateway port for western China. Rail link will transfer goods to and from western China, changing it from a remote region into a station that will transfer goods and commodities worth billions of dollars every year.