Pakistan prepares for positive future
The outlook for the Pakistan cement industry is positive with expansion expected over the next few years. Key reasons include improved sector fundamentals backed by higher demand, cost efficiencies driven by lower international coal prices and captive power generation reducing energy costs, capacity expansions and low to minimal risk of cement price destabilisation. As a result, cement demand is forecast to grow at least eight per cent over the next five years (FY16-21) on the back of an average GDP growth of 4.7 per cent.
The Invest and Finance Securities Ltd, while reviewing the performance of seven local cement companies stated that on the flip side, weakening exports (16 per cent of total cement dispatches during 9MFY16) and electricity/gas tariff hikes stand to marginally impact industry dynamics.
As part of the China-Pakistan Economic Corridor initiative and an increased focus on infrastructure spending by the Pakistani government – around US$44bn in transport infrastructure and energy-related construction in the next 15 years – cement demand is predicted to be robust.
Pakistan currently has a cement production capacity of about 45Mta (with current capacity utilisation rates at 83 per cent), which is expected to rise to around 52.5Mta by FY19.
Lucky Cement is setting up a 2.4Mta plant in Punjab, reflecting an investment of around PKR21bn. Acquisition of land and supplier confirmation is expected to be concluded by the end of FY16. The expansion would take the company’s existing capacity to over 10Mta. It will also bring a further 10MW waste heat recovery (WHR) power plant online by the end of 2016 besides from expanding its international footprint in DR Congo and Iraq.
Meanwhile, DG Khan Cement is currently undertaking expansion in the Southern Zone with a 2.6Mta cement plant that is expected to come online in FY19. The company will also bring a 30MW coal-fired power plant online and pursue further expansion in the south by FY18.
Maple Leaf Cement, which has a cement production capacity of ~3.4Mta in Iskanderabad District, Mianwali, is expected to bring a 40MW coal-fired power plant online by the end of FY17.
Fauji Cement Company's 3.4Mta plant is situated near Jhang Bahtar village, Tehsil Fateh Jang District Attock. The company started power generation from its 12MW WHR plant back in May 2015 and will reduce the cement producer's reliance on the national grid for its power supplies.
Cherat Cement Company Ltd is currently carrying out a 1.3Mta expansion at its 1Mta plant at Lakrai Village, District Nowshera, Khyber Pakhtunkhwa province. Following commissioning in FY17, the project would take the total name plate capacity to ~2.3Mt. In addition to its existing 6MW WHR plant, the company is undertaking installation of another 6MW WHR plant at its new production site.
Pioneer Cement Ltd announced plans to install a 12MW works, situated at Chenki, District Khushab (Punjab Province) has an installed capacity of ~2Mt. The company announced its plan to install a 12MW WHR plant at an estimated cost of PKR1.5bn. The plant is expected to meet around 38 per cent of the company’s total electricity requirement resulting in enhancement of the margins.
Kohat Cement Company Ltd has recently set up a 15MW WHR plant, which started production earlier this month. The WHR plant, at a capacity utilisation of ~65 per cent is expected to meet ~30 per cent of the company’s total power requirement, reducing its dependence on the national grid for the operation of its 2.9Mta works at Chenki, Khushab District in Punjab.
