Sei sulla pagina 1di 14

What is Cement ?

Cement is a powder, which by hydraulic reaction (i.e. with water) Iorms a solid, cohesive mass.
cement is kind oI binder, a substance which sets and hardens independently, and can bind other
materials together. Cement plays a Iundamental role in daily liIe, it tends to be one oI those
products we all take Ior granted, yet without it, our world would quite literally Iall apart.
Cement is manuIactured by combining a homogenous blend oI careIully proportioned raw
materials (limestone or chalk and clay/ shale/ sand) at a very high temperature (14500C) in a
rotary kiln. The raw materials Iuse together to Iorm 'clinker', a hard granular material. The
clinker is ground to a powder along with gypsum to make cement.
Joseph Aspdin, an English mason who patented the product in 1824, named it portland cement
because it produced a concrete that resembled the color oI the natural limestone quarried on the
Isle oI Portland, a peninsula in the English Channel. Today cement is an essential material in
modern construction.
As a constituent oI concrete, cement puts much oI the strength into our homes, schools, hospitals
and much more. We also need it to make the mortar that bonds our bricks and blocks as well as
in the manuIacture oI many concrete products ranging Irom blocks to pipes. Today, concrete is
the second most consumed substance in the world after water.
Cement is made by heating limestone with small quantities oI other materials (such as clay) to
1450C in a kiln. The resulting hard substance, called clinker`, is then ground with a small
amount oI gypsum into a powder to make Ordinary Portland Cement`, the most commonly used
type oI cement (oIten reIerred to as OPC).
Portland cement is a basic ingredient oI concrete, mortar and most non-speciality grout. The
most common use Ior Portland cement is in the production oI concrete. Concrete is a composite
material consisting oI aggregate (gravel and sand), cement, and water. As a construction
material, concrete can be cast in almost any shape desired, and once hardened, can become a
structural (load bearing) element. Portland cement may be gray or white.

History oI cement industre in paklstan.
Cement is one oI major industries oI Pakistan. Pakistan is rich in cement raw material. Currently
many cement plants are operating in private sector. Pakistan Cement Industry has huge potential
Ior export oI cement to neighbouring countries like India, U.A.E, AIghanistan, Iraq & Russian
States. There has been a robust growth oI cement demand seen both in domestic and exports
market during the Iinancial year ended June 30, 2007. The industry achieved an overall growth
oI 32 with domestic demand oI cement increased by 24.95 whereas the exports increased by
111.86. The overall growth achieved by many cement Iactories Ior the year under review was
111.29 consisting oI domestic and export markets at 71.02 and 335.12 respectively.
Cement Process

Raw Materials
The main raw materials used in the cement manuIacturing process are limestone, sand, shale,
clay, and iron ore. The main material, limestone, is usually mined on site while the other minor
materials may be mined either on site or in nearby quarries. Another source oI raw materials is
industrial by-products. The use oI by-product materials to replace natural raw materials is a key
element in achieving sustainable development.
Raw Material Preparation
Mining oI limestone requires the use oI drilling and blasting techniques. The blasting techniques
use the latest technology to insure vibration, dust, and noise emissions are kept at a minimum.
lasting produces materials in a wide range oI sizes Irom approximately 1.5 meters in diameter
to small particles less than a Iew millimeters in diameter.
Material is loaded at the blasting Iace into trucks Ior transportation to the crushing plant.
Through a series oI crushers and screens, the limestone is reduced to a size less than 100 mm and
stored until required.
Depending on size, the minor materials (sand, shale, clay, and iron ore) may or may not be
crushed beIore being stored in separate areas until required.
Raw Grinding
In the wet process, each raw material is proportioned to meet a desired chemical composition and
Ied to a rotating ball mill with water. The raw materials are ground to a size where the majority
oI the materials are less than 75 microns. Materials exiting the mill are called "slurry" and have
Ilowability characteristics. This slurry is pumped to blending tanks and homogenized to insure
the chemical composition oI the slurry is correct. Following the homogenization process, the
slurry is stored in tanks until required.
In the dry process, each raw material is proportioned to meet a desired chemical composition and
Ied to either a rotating ball mill or vertical roller mill. The raw materials are dried with waste
process gases and ground to a size where the majority oI the materials are less than 75 microns.
The dry materials exiting either type oI mill are called "kiln Ieed". The kiln Ieed is pneumatically
blended to insure the chemical composition oI the kiln Ieed is well homogenized and then stored
in silos until required.
Whether the process is wet or dry, the same chemical reactions take place. asic chemical
reactions are: evaporating all moisture, calcining the limestone to produce Iree calcium oxide,
and reacting the calcium oxide with the minor materials (sand, shale, clay, and iron). This results
in a Iinal black, nodular product known as "clinker" which has the desired hydraulic properties.
In the wet process, the slurry is Ied to a rotary kiln, which can be Irom 3.0 m to 5.0 m in diameter
and Irom 120.0 m to 165.0 m in length. The rotary kiln is made oI steel and lined with special
reIractory materials to protect it Irom the high process temperatures. Process temperatures can
reach as high as 1450
C during the clinker making process.
In the dry process, kiln Ieed is Ied to a preheater tower, which can be as high as 150.0 meters.
Material Irom the preheater tower is discharged to a rotary kiln with can have the same diameter
as a wet process kiln but the length is much shorter at approximately 45.0 m. The preheater
tower and rotary kiln are made oI steel and lined with special reIractory materials to protect it
Irom the high process temperatures.
Regardless oI the process, the rotary kiln is Iired with an intense Ilame, produced by burning
coal, coke, oil, gas or waste Iuels. Preheater towers can be equipped with Iiring as well.
The rotary kiln discharges the red-hot clinker under the intense Ilame into a clinker cooler. The
clinker cooler recovers heat Irom the clinker and returns the heat to the pyroprocessing system
thus reducing Iuel consumption and improving energy eIIiciency. Clinker leaving the clinker
cooler is at a temperature conducive to being handled on standard conveying equipment.
inish Grinding and Distribution
The black, nodular clinker is stored on site in silos or clinker domes until needed Ior cement
production. Clinker, gypsum, and other process additions are ground together in ball mills to
Iorm the Iinal cement products. Fineness oI the Iinal products, amount oI gypsum added, and the
amount oI process additions added are all varied to develop a desired perIormance in each oI the
Iinal cement products.
Each cement product is stored in an individual bulk silo until needed by the customer. ulk
cement can be distributed in bulk by truck, rail, or water depending on the customer's needs.
Cement can also be packaged with or without color addition and distributed by truck or rail.

The cement industry in Pakistan has come a long way since independence when the country had
less than halI a million tonnes per annum production capacity. y now it has exceeded 10
million tonnes per annum as a result oI establishment oI new manuIacturing Iacilities and
expansion by the existing units. Privatization and eIIective price decontrol in 1991-92 heralded a
new era in which the industry has reached a level where surplus production aIter meeting local
demand is expected in 1997.
The cement industry in Pakistan Iaces two serious threats: closure oI units based on wet process,
and poor cash Ilow rendering the units incapable oI debt servicing due to increasing cost oI
electricity, Iurnace oil and imported craIt paper used Ior cement packing. The cost oI Iurnace oil
alone has increased by nearly 100 in the last 15 months alone. With the increase in Iurnace oil
the increase in electricity tariII has also become inevitable.
Pakistan has remained a net importer oI cement but due to the privatization oI units operating
under state control and subsequent expansion programmes by the new owners supported by
Iinancial has pushed the industry to a point where the country is bound to reach an oversupply
situation. However, the recent increase in energy cost provides opportunity Ior the eIIicient units
based on dry process to sustain the situation Ior a relatively longer period. It would also be
possible because the expansion by the existing units and establishment oI new units are being
Pakistan's cement market is divided into two distinct regions, North and South. The northern
region comprises the Punjab, NWFP, Azad Kashmir and upper parts oI alochistan, whereas the
southern region comprises the entire province oI Sindh and lower parts oI alochistan.
Traditionally, the southern region has always been surplus in cement production but with the
establishment oI more plants in the northern parts oI the country the region has become almost
selI-suIIicient in supply oI cement.
Demand vs supply
The demand-supply gap which Ior the last decade was in Iavour oI manuIacturers is now set to
switch the other way with supply outpacing demand by the end oI 1997. Historically, demand
has grown at an average rate oI 7, with the Northern region averaging 8 and Southern region
lagging behind at 4. There is much pessimism about the industry's Iuture due to a tremendous
increase in supply expected by the end oI next year.
The way new plants are being established and existing plants are undertaking expansion, the
demand-supply equation is bound to create surpluses. However, it has been observed that actual
progress is slower than planned to avoid a possible glut situation. This will eIIectively narrow
down the gap between demand and supply and thereby ease the pressure on prices.
Factors which can possibly change the surplus position into a near-equilibrium between demand
and supply are:-
1. Formation oI manuIacturers' cartel to avoid price decline;
2. Delay in implementation oI planned additions and expansions;
3. EIIorts to export cement; and
4. Increase in demand iI construction oI some oI the mega-sized inIrastructure projects
More competition
As the cement market is moving Irom a virtual 'sellers' market' to an over-supply situation, it is
expected that when prices stagnate and proIitability becomes a Iunction oI volume and
economies oI scale, locational advantage and proximity to markets will become extremely
important Iactors.
At present the Ireight charges are a massive 20 oI the retail prices. The plants located very
close to each other and tapping the same market will have to expand their markets which will
increase their Ireight expenses.
Dandot, Pioneer, Maple LeaI and Garibwal are all located within a radius oI 100 kilometres and
are selling bulk oI their production in the same areas and will thus Iace serious competition Irom
each other.
Positive side
Pakistan has one oI the highest population growth rates in the world, touching 3. This has
prompted a sizable demand Ior housing Iacilities in the country. According to estimates oI
construction industry, there is a huge backlog oI about 6.25 million housing units in the country.
ulk oI the current demand oI 0.6 million units needed every year is Ior urban areas. With
greater urbanisation the demand Ior cement is expected to grow at an average oI nearly 7 per
The demand Ior cement Ior inIrastructure units is expected to grow with the commencement oI
work on motorways, power plants, Islamabad New City, Karachi Package and Ghazi rotha
dam. II all these projects are implemented as per schedule, the demand Ior cement is expected to
grow at a higher rate.
Tax structure
Instead oI providing any relieI in the budget, the sector was Iurther penalized with a 3 increase
in sales tax to 18 and an increase in excise duty to 35. So Iar, the manuIacturers have been
able to pass on the increase to consumers but the situation is unlikely to continue. However, the
possibility oI Iormation oI a cartel cannot be ruled out. Since massive investment has been made
in the sector, any reduction in price oI cement can reduce proIit margins oI all the units.
Formation oI cartel and Iixation oI price at a level high enough to cover increasing costs oI
inputs and ensure reasonable proIit margins may provide a short-term relieI to the manuIacturers.
Such a cartel may be against the interests oI consumers but can help the manuIacturers to survive
with some dignity.
Formation and smooth operation oI a cartel is generally diIIicult but in the case oI cement
industry it may not be so because the only restriction could be on the level oI capacity utilization
along with a modest uniIorm reduction in price oI cement. However, the units are in diverse
states oI Iinancial health, enjoy diIIerent levels oI competitive advantage, and thereIore need
diIIerent prescriptions to maintain their proIitability.
Production process
Each tonne oI cement requires about 1.7 tonne oI limestone, gypsum and silica, etc. y volume
limestone accounts Ior about 80 and clay 19 oI the intermediate product clinker. Gypsum
is later on added to clinker in the ratio oI 4:96 to obtain cement. Pakistan has all these raw
materials in abundance and the country can Ieed these material to existing cement plants Ior
more than 100 years. This ensures both cheap and smooth supply oI raw materials but proximity
to raw materials supply is not a major competitive advantage.
Production oI cement is a continuous process. Raw materials are dried, ground, proportioned and
homogenised beIore being burnt in rotary kilns. The resulting material 'clinker' is pulverised with
gypsum at the grinding stage to obtain cement.
The cement industry in Pakistan uses two distinct production processes, the 'dry' and the 'wet'
process. oth the processes use diIIerent types oI kilns. In the wet process raw materials are Ied
into kiln in slushy Iorm. As it consumes more energy to raise the temperature oI the kiln to the
required levels it is costly. In the dry process the ground raw materials are Ied into the kiln in dry
powder Iorm thereIore energy consumption is low to raise the temperature to the required level.
Cement plants established in Pakistan upto the seventies were based on wet process whereas the
plants established in the eighties and onward are based on dry process. These include the plants
established by the SCCP and the private sector. As oI June 1995, 60 oI the production capacity
was based on dry process which has Iurther increased as the newer units are also based on dry
Cost of production
Since the industry Iaces a situation where sales price will be Iixed by mutual consensus, the cost
oI production will be the most critical Iactor oI proIitability. Energy cost is a major component
oI total cost oI production. It contributes at an average 40 to 45 percent towards total cost oI
cement production. Energy cost is even higher in case oI those plant which use wet process. A
cement plant based on wet process consumes 165 kg oI Iurnace oil to produce one tonne oI
clinker as compared to 85 kg oI Iurnace oil used in dry process to produce the same quantity oI
clinker. Since cement plants use both Iurnace oil and electricity, any increase in the prices oI
these two products is detrimental to proIitability oI the industry. Ever since October 1995,
however, there has been more than 60 increase in the price oI Iurnace oil.
Another signiIicant cost component is packaging material. Cement is rarely sold in bulk in
Pakistan almost all cement sales are in Iour-ply papersacks. Cost oI papersacks has gone up
by almost 90 since December 1994. Only one unit, Cherat Cement, has the advantage oI
having an associate company producing such bags.
Dg khan
D.G. Khan Cement was the most prized unit out oI the cement units privatised by the Nawaz
ShariI government. OI all the plants owned by the SCCP it was the most modern plant with bulk
oI depreciation amortised and interest charges paid Ior. The company enjoys a virtual monopoly
in its sales territory. There is no other cement plant within a radius oI 400 kilometres. The
current capacity oI 720,000 tonnes per annum (TPA) is being enhanced to 1.809 million tonnes
at a cost oI Rs. 6 billion. The IFC is also participating in the project with a loan component oI
US$ 65 million and equity worth US$ 5 million.
The expansion will come on line at a time when there will be supply overhang in the industry.
With margins coming under pressure it will have to bear the added brunt oI higher Iinancial
charges and increased depreciation cost in the years to come.
Analysis oI the latest halI-yearly results oI the company shows that although sales oI the
company have gone up by 3.5, the increase in cost oI sales has reduced gross margin Irom 61
to 48. With rising inputs cost not being matched by similar increase in price oI cement,
margins are expected to shrink Iurther. The company, aIter the expansion is expected to Iace
Iiercer competition Irom Zeal Pak, Pioneer, Dandot and Wah. To wrest market share Irom the
competitors, it is likely that D.G. Khan will have to reduce its cement prices.
Dandot Cement, privatised in 1992, was able to wipe oII its accumulated losses by the end oI its
Iirst Iinancial year aIter privatisation. Dandot has increased the plant capacity Irom 1000 tonnes
to 1600 tonnes per day, through an optimization programme completed in July1995.
The Chakwal Group, which acquired management control oI Dandot Cement, is setting up
another cement plant, Chakwal Cement the largest cement plant in the country. This will give
the Group control over 2.3 tonnes per annum production. The decision to set up another plant in
the same vicinity could go both ways. On the positive side it could provide leverage to out-price
competitors especially as the industry moves towards a possible over-supply situation. Chakwal
Cement is located close by a motorway to be constructed which provides it an opportunity to
market its cement in large quantities to the project.
On the negative side, Dandot is a highly unionized concern and suIIers Irom a strained labour-
management relationship which has led to plant closure in the past. In addition, the investors are
losing conIidence in the Group mainly due to delayed commencement oI its much-talked about
Dhan Fibres project.
Cement export
The Iederal government's decision to allow export oI clinker and cement by the private sector has
been eclipsed due to absence oI necessary rules and regulations. The export consignment oI
clinker by a unit was delayed as the customs authorities reIused to allow export. The Iederal
government on August 13 issued a notiIication which stated "Export oI cement and clinker will
be allowed by sea on such terms and conditions as may be notiIied by the ministry oI commerce.
Since consumption oI cement in southern region has gone down and northern region has attained
selI-suIIiciency, units located in southern region are Iorced to cut down their capacity utilization.
The possibility oI cement export is the proverbial silver lining Ior the recession-torn industry
according to analysts at AKD Securities While there are cement deIicient countries like
angladesh and Sri Lanka importing approximately 2 million tonnes per annum each, there is
tough competition Irom India and Chinese suppliers.
In Iact, apart Irom the prices oIIered by Pakistani manuIacturers, lack oI Iacilities Ior handling
bulk export oI cement has become a major impediment bulk handling is cheaper than
handling bagged cement.
Export oI cement is necessary Ior the existence and survival oI the industry rather than a source
oI proIit. The announcement oI policy on cement export has created positive sentiments.
uture outlook
At the current point cement manuIacturers and the government have to take concrete steps even
to keep units in production. On the inputs side, necessary steps are required to contain the
increasing energy cost. The government must also look into the case oI providing subsidy on
Ireight to the exporters oI clinker and cement. The prescription is to optimize capacity utilization.
According to analysts the Iuture oI cement exports depends on two Iactors: surge in cement
prices in the export markets and the government oI Pakistan subsidising Ireight charges. While
the quantity oI exportable cement in the region would gradually decline and prices are expected
to increase, it will take time to get a Iavourable decision Irom the government to provide subsidy
even on Ireight cost. ut absence oI bulk cement handling Iacilities will remain a major
Lucky cement which completed its construction at a Iantastic speed to qualiIy Ior duty
exemptions has met the Iate apprehended by the industry experts. Due to various technical
problems including sinking oI some Ioundations, the management was Iorced to close down the
production soon aIter starting commercial production. It is Ieared that it would not be able to
resume production till the Iirst quarter oI the next calendar year.
ut prospects oI recovery oI cement industry have been Iurther reduced due to another recent
increase POL prices. Electricity tariII is also expected to be revised upward shortly. The
advantage oI devaluation has been eroded almost completely due to increase in energy cost.
.G. Khan Cement Company Limited (DGKCC), a unit oI Nishat group, is the largest cement-
manuIacturing unit in Pakistan with a production capacity oI 5,500 tons clinker per day. It has a
countrywide distribution network and its products are preIerred on projects oI national repute
both locally and internationally due to the unparallel and consistent quality. It is list on all the
Stock Exchanges oI Pakistan.

DGKCC was established under the management control oI State Cement Corporation oI Pakistan
Limited (SCCP) in 1978. DGKCC started its commercial production in April 1986 with 2000
tons per day (TPD) clinker based on dry process technology. Plant & Machinery was supplied by
UE Industries oI Japan.

cquisition of DGKCC by Nishat Group

Nishat Group acquired DGKCC in 1992 under the privatization initiative oI the government.
Starting Irom the privatization, the Iocus oI the management has been on increasing capacity as
well as utilization level oI the plant. The company undertook the optimization by raising the
capacity immediately aIter the privatization by 200tpd to 2200tpd in 1993.

Capacity ddition

To meet the increasing demand and to capitalize on its geographic location, the management
Iurther expanded the capacity by adding another production line with a capacity oI 3,300 tons per
day in year 1998. Design oI the new plant is based on latest dry process technology, energy
eIIicient and environmental protection Irom particulate pollution according to the international
standards. The plant and machinery was supplied by M/s F.L. Smidth oI Denmark. As a result,
DGKCC emerged as the largest cement production plant in Pakistan with annual production
capacity oI 1,650,000 M tons oI clinker (1,732,000 M.Tons Cement) constituting about 10
share oI the total cement production capacity oI the country. The optimization plan is still
underway to increase the total capacity oI the two units to 6700 TPD by mid oI 2005 Irom 5500
TPD at present.

Expansion -Khairpur Project

Furthermore, the Group is also setting up a new cement production line oI 6,700 TPD clinker
near Kalar Kahar, Distt. Chakwal, the single largest production line in the country. First oI its
kind in cement industry oI Pakistan, the new plant will have two strings oI pre-heater towers, the
advantage oI twin strings lies in the operational Ilexibility whereby production may be adjusted
according to market conditions. The project will be equipped with two vertical cement grinding
mills. The cement grinding mills are Iirst vertical Mills in Pakistan. The new plant would not
only increase the capacity but would also provide proximity to the untapped market oI Northern
Punjab and NWFP besides making it more convenient to export to AIghanistan Irom northern
Future Course oI action Ior Cement Industry.
The policy oI the Government is to keep a balance between rapid economic development, on the
one hand, and social justice and consumer`s protection, on the other. There is a traditional
conIlict between these two aims. It is, thereIore, necessary to regulate trade, commerce or
industry in the interest oI Iree competition therein. The Ordinance was promulgated to provide
Ior measures against un-due concentration oI economic power, growth oI un- reasonable
monopoly power and un-reasonably restrictive trade practices.
Thus cement industry too is monitored and answerable to rules and regulations developed by the
monopoly control authority oI Pakistan. The government is considering allowing Iurther
concessions and additional incentives Ior cement export, with a view to increase overall export
volume. These measures will immensely help in promoting and protecting high investments
made in cement sector in recent years. In the wake oI its huge surplus production as a result oI
massive capacity expansion undertaken it

rather seems imperative Ior Pakistani cement industry, on one hand, to
sustain existing export markets and, on the other, explore new markets.
1. Govt. Should improve law & order to support export
2. an likely to be place on cement import
3. No changes in cement import and export policy.
4.Crisis: country Iaces energy crisis, another weekly holiday under-
5. Short-term measures:

Duty drawback

Port charges
6. Medium term measures:

Abolishing oI / reduction in central
excise duty
7. Long term measures:

InIrastructure at port.
8. Pakistan could save about $70 million on the import oI Iurnace oil per annum. This would result
in a low price per bag oI cement and would ultimately encourage domestic demand Ior cement.
9. A comparative study regarding taxes on cement indicates that as against Pakistan where the taxes
on cement are 37 per cent, it is nil in Iran, 7 per cent in Thailand, 10 per cent in Egypt, 10 per
cent in Philippines, 10 per cent in Indonesia and 18 per cent in India.