29 cement production units.

19 under production units.

17 companies are registered in the Karachi Stock

Exchange. Production Capacity was 17.55 million tons in 2004. Production Capacity increased to 36.84 million tons by May 2007. The demand for cement has increased from 14 million tons in 2004 to 22 million tons by the end of 2007. Pakistan has a major surplus which can be exported.

 Cement sector has potential to export cement of worth

$1 Billion per annum. Export markets are Saudi Arabia, Central Asian States and Middle Eastern countries. Pakistan is rich in limestone, gypsum, and clay which constitute the basic raw material for cement. In spite of having such a huge reserve of raw material Pakistan had to import cement for a long period of time which reached to a level of 1.3 million tons in 1981-82.

 The major constraint was the lack of local engineering

capabilities. Initial investment required was Rs 500 million of foreign exchange to import machinery and 4 -5 years of establishing time. The cement industry faced a recession period from 1990 to 2002, with an average growth rate of 2.96%. For the period from 2003 to 2007, Pakistan had registered an average growth rate of 20%.

 At the time of independence only four units were

operating in Pakistan with a capacity of 0.471 million tons and total production of 0.3 million tons. From 1948-58, production increased to 0.66 million with a demand of 1 million tons. During the decade of development (1958-68) the no. of units increased from 6 to 9. There was no growth in the period from 1971-77 and is known as the grey era of cement production. During Zias regime after denationalization of cement industry, the no. of units increased from 9 to 24.

 Ordinary Portland Cement (OPC). Sulphate Resisting Cement (SRC).

Blast Furnace Slag Cement (BFSC).

White Cement.

 Wet Process: Huge amounts of water were required

and energy consumption was immense. This process has become obsolete and therefore companies have switched over to Dry and Semi-Dry processes. Semi Dry Process: This process has also been abolished because of high energy/fuel requirements. Dry Process: Energy requirements are low, around 40% less than the wet process. The raw material is preheated and therefore needs less energy. The kiln is shorter and needs less space. Plants established in the 80s and 90s used this process, older plants have also converted to dry process.

 Quarrying and Crushing Blending and storage Raw Milling and Homogenization Burning Loading and Dispatching Cement dispatch

 Limestone

Alumina
Iron Clay

Gypsum
Slag/ Fire Clay Shale

 Direct and Indirect taxes: Rs 23.50 Billion.

Value of Fixed Assets Deployed: Rs 85.21 Billion

Loans from Financial Institutions: Rs 79.53 Billion Shareholders Equity: Rs 80 Billion

Employment (Direct and Indirect): 150,000 (Approx.)

Contribution to GDP: 8.75%

 Number of units of Grey Cement North Zone: 19

South Zone: 10
Total: 29

 Industry provides very few barriers to entry. Positive demand and profitability Two capacity addition cycles in 1990s. Current capacity additions is largest: 20 mill ton to 44

mill tons.
Even though barrier to entry is low but huge amount

of investment makes it a difficult task.

 High demand in Middle East and African countries

has significantly effected the cement industry. APCMA says that the cement exports have increased by 139 % by touching 5 million tons. Pakistan cement exports increased in UAE after they removed the 5% import duty to enhance construction in DUBAI. The regional prices are benefitting Pakistan as they are selling at price premium. Initial prices FOB were $65 per ton, Currently they have increased to $75 per ton.

 Taxes: Excise duty: Rs. 750 per ton, Sales tax: 15%

Import: Cement imports: Nil, 25% duty.

Investment: New Chinese project costs Rs 6 Billion. Capacity utilization: Increased to 88%, which is

highest among all industries in Pakistan. Demand: Demand for cement has increased to 20 million ton in 2006-07 from 14 million ton in 2005-06 Concessions to Local manufacturers: 0% duty on import of raw material not manufactured locally.

COSTS Variable Cost Fixed Cost Total Production Cost

RS./TON 1,910.7 938.15 2,848.72

RS./KG 95.53 46.91 142.44

Excise Duty
GST @ 15% Freight and unloading Margin of Distributor, whole seller, Retailer Manufacturers profit@ 10% on equity Market Price

750.00
540.00 600.00 300.00 500.00 5,538.72

37.50
27.00 300.00 15.00 25.00 276.94

SWOT Analysis

 Availability of Cheap Raw Material

Availability of Cheap Labor

Availability of Cheap Energy source Higher quality Cement

Access to worldwide Cement market due to WTO

Easy Access to local markets

 Unavailability of skilled labor

Higher cost of production (utilities)

Higher GST as compared to other countries Inadequate supply of coal

Import of capital machinery for production

Unavailability of basic infrastructure outside Karachi

 Export to countries other than India and Middle

Eastern countries. Higher production capacity than the local demand. High demand of white cement in the international market. Massive infrastructure development in process. Increasing per capita consumption. Signing of contract to mine local coal.

 Increasing prices of international coal.

Shortage of plastic bags creating constraints for

exports. Non-attentive behavior of Government. Increasing cost of debt. Import of lower quality cement. Increasing price of real estate. Unlawful stocking of cement in private warehouses. Expansion of production worldwide. Frequently altering prices.

 Needs subsidies to enhance production to gain more of

the market share Government should provide industry cheaper energy sources. Keep coal prices in check. White cement is in great demand in Middle East and Europe, needs to increase production. Loans should be provided at cheaper rates. Plants need to be opened in areas of NWFP and Baluchistan.

 The taxation is very high and needs to be reduced.

Need for more plastic bags for exports.

Stop illegal stocking of cement in private ware houses. Stop and have quality controls to avoid import of sub

standard cement.