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Cement industry Pakistan

Analysis of Pakistan Cement Industry

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Cement industry Pakistan

  1. 1. Analysis of Pakistan Cement Industry
  2. 2. Pakistan’s manufacturing sector constitutes as the second largest sector of the country’s economy contributing 13.5 percent to GDP and generating biggest number of industrial career opportunities with technology transfer. The major reason for the existence of this industry is the availability of the raw materials. Pakistan has unlimited reserves of limestone and clay, which can support the industry for another 50-60 years. The annual production of the cement at the time of the creation of Pakistan was only 300,000 tones per year. By 1954 the production increased to 660,000 tonnes per annum against a demand of 1,000,000 tonnes per annum. At this time PIDC (Pakistan Industrial Development Corporation) took initiative and established two cement factories Zealpak (240,000 tonnes) and Maple Leaf (100,000 tonnes) having a capacity of 340,000 tones, thereby increasing the production to 1,000,000 tonnes per annum. Introduction
  3. 3. Pakistan is among the world’s fastest-growing construction markets and is predicted to grow an average 12 percent yearly for the next five years especially because of China-Pakistan Economic Corridor (CPEC) mega projects. The cement sector is aiming to even raise its capacity, riding a wave of Chinese-financed infrastructure projects across Pakistan.
  4. 4. World Cement Exporters The major world exporters of Cement Industry are as follows:  China (2500 million metric tons)  India (280 million metric tons)  United States (83 million metric tons)  Iran (75 million metric tons)  Turkey (75 million metric tons)
  5. 5. China is the world’s market leader of cement. The annual production of cement in China is whopping 2500 million metric tons. These cement companies are mostly owned and operated by the state due to which the cement manufacturing companies has the support from the government and they require very less capital. The main reason of manufacturing so much cement is the growing population and urbanization due to which more and more people are moving to cities and metropolitans from rural areas. Though the cement industry is huge, it is criticized and praised at the same time. The cement industry is undoubtedly responsible for the huge and brilliant infrastructure but it has also resulted to a huge amount of pollution which is really bad for the environment. Market Leader
  6. 6. At the start of the PRC in 1949, the Chinese cement industry was relatively small with many small cement kilns spread throughout towns and villages. In the 1980s a trend towards large integrated cement plants emerged and several government-owned cement producers were established to raise production. In 2000 the government began to reduce the number of small cement plants on the basis of their inefficiency and high levels of emissions. These efforts are ongoing. Market Leader
  8. 8. Statistics of Pakistan Cement Industry July to June Production Capacity Local Despatches Exports Total Despatches Capacity Utilization Surplus Capacity (Mn. Tonnes) (Mn. Tonnes) (Mn. Tonnes) (Mn. Tonnes) % age (Mn. Tonnes) 1998-1999 16.41 9.62 - 9.62 58.63% 6.79 1999-2000 16.38 9.94 - 9.94 60.67% 6.44 2000-2001 15.53 9.93 - 9.93 63.95% 5.60 2001-2002 16.10 9.83 0.11 9.94 61.73% 6.16 2002-2003 16.32 10.98 0.47 11.45 70.16% 4.87 2003-2004 17.28 12.54 1.12 13.66 79.08% 3.62 2004-2005 17.91 14.79 1.57 16.35 91.32% 1.56 2005-2006 20.83 17.05 1.51 18.55 89.08% 2.28 2006-2007 30.50 21.03 3.23 24.26 79.56% 6.23
  9. 9. Statistics of Pakistant Cement Industry 2008-2009 42.28 20.33 10.98 31.31 74.05% 10.97 2009-2010 45.34 23.57 10.65 34.22 75.46% 11.13 2010-2011 42.37 22.00 9.43 31.43 74.17% 10.94 2011-2012 44.64 23.95 8.57 32.51 72.83% 12.13 2012-2013 44.64 25.06 8.37 33.43 74.89% 11.21 2013-2014 44.64 26.14 8.14 34.28 76.79% 10.36 2014-2015 45.62 28.20 7.20 35.40 77.60% 10.22 2015-2016 45.62 33.00 5.87 38.87 85.21% 6.74 2016-2017 46.39 35.65 4.66 40.32 86.90% 6.08 2017-2018 (6 Month) 46.94 19.84 2.41 22.24 94.77% 1.23
  10. 10. A largest cement manufacturers of Pakistan with a production capacity of 14,000 tons per day (4.200 million tons/annum). 1986 Initially it was state-owned company with thousands of employees. The company established their first active plant in southern Punjab city Dear Ghazi Khan and then they established their second plant in northern Punjab's city Chakwal. D.G. Khan Cement
  11. 11. Headquarters: Lahore, Punjab Plants: D.G Khan & Chakwal Company Type: Public Company NOE: 1001-5000 employees Dealers: 2200 Market share: 12% Exporting Countries: 10 Specialties: Ordinary Portland Cement &Sulphate Resistance Cement D.G. Khan Cement
  12. 12. Ratios
  13. 13. Lucky Cement Limited was founded in 1993 by Abdur Razzak Tabba. The company started with factories in the Pezu located in Lakki Marwat District district of the North West Frontier Province(Khyber Pakhtunkhwa). It now, also, owns a factory in Karachi. Lucky Cement Limited is one of the largest producer and leading exporter of quality cement in Pakistan with the production capacity of 7.75 million tons per annum. The company is listed on Karachi, Lahore, Islamabad and London Stock Exchanges. Lucky Cement
  14. 14. Headquarters: Karachi, Sindh Plant: Karachi & Lucky Marwat Company Type: Public Company NOE: 1001-5000 employees Dealer: 200 Market Share: 16% Specialties: Ordinary Portland Cement, Sulphate Resistance Cement, Block Cement & Clinker Lucky Cement
  15. 15. Lucky Cement
  16. 16. Maple Leaf Cement is the third largest cement factory in Pakistan. It was set up in 1956 as a joint collaboration between the West Pakistan Industrial Development Corporation and the government of Canada. It is strategically located at Daudkhel (District Mianwali) in Northern Pakistan, which is an area rich in raw materials required for the production of cement. The total capacity of maple leaf is 11,700 tpd. The capacity of White Cement has also increased from 100 tpd to 500tpd with the addition of a new plant. Maple Leaf cement has 9% of the market share of OPC and is a leading brand in Pakistan with a diverse customer base. It is also the largest producer of White Cement in the country with 80% of market share. Maple leaf
  17. 17. Headquarters: Lahore, Punjab/Pakistan Plant: Mianwali Company Type: Public Company NOE: 501-1000 employees Market Share: 8% Specialties: Ordinary Portland Cement, Sulphate Resistance Cement, Low Alkali Cement, Wall Coat Maple Cement & White Cement Maple leaf
  18. 18. Ratios
  19. 19. APCMA is the apex body of the cement manufacturers of Pakistan. It is registered body under section 3 of the Trade Organization Ordinance 2007 wide license no 14, dated April 26, 2008 issued by Ministry of Commence. It was incorporated on14th of September 1992 under section 32 of the Companies Ordinance 1984. Services: APCMA plays a significant role in projecting the cement industry to the Government and coordinating various activities in respect of formulation of Government policies for the cement industry through its continuous dialogues and interactions. All Pakistan Cement Manufacturer Association
  20. 20. Represents on all major policy making bodies concerned with cement. Supplies desired information to all concerned Ministries Helps in preparation of important Government documents concerning cement like Reports for Five Year Plans, etc. INDUSTRY: APCMA identifies and strengthens industry’s role in the economic development of the country. Provides up-to-date statistical data/information to the industry and other agencies. Interacts for Industry's problems with the Government and co-ordinates various activities with other bodies. Focuses infrastructural problems (Rail, Coal, Power, etc) and suggests suitable measures for their solution. All Pakistan Cement Manufacturer Association
  21. 21. Political:  Coal rates, power tariffs, freight plays a very important factor in the price determination, interestingly, government control all of these prices.  The government policies proved to be amazing for the cement industry of Pakistan.  Higher spending by the Government towards PSDP (Public Sector Development Program) led to the increase of cement demand in Pakistan.  The public sector projects under this program includes the construction of large and small dams, powerlands, highways, roads, irrigation canals, rapid transit systems and flyovers etc. PEST Analysis
  22. 22. Economical:  Cement sector is running at 97-99 percent capacity utilization per month.  This sector is expanding by nearly 30 million tons over the next five years.  Cement industry is among the highest contributors to the national exchequer over the last four years and has paid Rs189 billion in taxes.  Future of cement industry is very bright. Pakistan is among the world’s fastest- growing construction markets and is predicted to grow an average 12 percent yearly for the next five years especially because of CPEC mega projects.  A large number of government infrastructure and housing projects are under construction. PEST Analysis
  23. 23. Social:  Pakistani consumers prefer buying branded cement like D.G Khan Cement, Lucky Cement etc.  Industry will create large number jobs in coming years. PEST Analysis
  24. 24. Technological:  Technological advancements are underway in developed countries and govt have positive plans to bring in new technology.  Emphasis is on creating highly energy efficient and environment friendly technology to produce cement. PEST Analysis
  25. 25. Porter’s Five Forces Treat of New Entry:  Threat of New Entry Entering the business is expensive.  Huge players advantage from economies of scale.  Wide appropriation and showcasing channels are critical key resources that are hard to replicate by new players, along these lines restricting entry.  Increasing costs implies bring down IRR for new green-field capacities.  Generally high barriers to entry.
  26. 26. Porter’s Five Forces Competitive Rivalry:  Around 55% of cement is consumed by the housing sector, with retail customers accounting for the bulk of the customer base. But retail buyers do not have much leverage in dictating the pricing.  Lack of substitutes also causes no buyer power.  Local markets are dominated by small number of cement firms.  Demand is inelastic— exists at all price points.  Overall, no buyer power.
  27. 27. Porter’s Five Forces Supplier Power:  Most companies have captive limestone reserves, so no supplier power here.  Coal linkages have reduced so companies depend more on alternative fuel sources, where suppliers can dictate prices.  Cement manufacturers have argued that price hikes in the industry are due to increases in the price of both transportation and raw materials.  This means that suppliers are powerful enough to force new prices on the industry.  Overall, moderate to high supplier power.
  28. 28. Porter’s Five Forces Threat of Substitution: No threat, as there is no substitute for cement. Other building materials such as timber are only suitable for low-rise buildings. On the other hand, although steel can be used for medium to high-rise buildings, building regulations normally require structural steel to be encased in concrete for fire protection purposes. This increases the importance of cement and hence reduces the threat of its substitutes.
  29. 29. Porter’s Five Forces Competitive Rivalry  Large companies enjoy economies of scale.  Competition is regional is nature, as cement cannot be transported across regions.  Given over-capacity, slowdown in demand weakens prices, so no real pricing power.  Overall, moderate competitive rivalry.
  30. 30. Swot Analysis Strengths:  Strong Industry Base  Sustained Growth in Production and Exports  Easy Availability of Production Resources  Surplus Production for Local and Export Markets  Good Local and International Reputation
  31. 31. Swot Analysis Weaknesses:  Lack of Innovation and Technology Development  Absence of Vision to identify weaknesses  Lack of Funds to Take Up New Projects  Lack of Professional Expertise within Industry  Dependence on Cartelisation for adequate Revenue  Lack of Research & Development
  32. 32. Swot Analysis Opportunities:  Future Growth Potential  Rising Demand  Emerging Export Markets  Construction Boom  Developing a Long Term Vision and Strategy  Research to Develop New Products  Focus on Cost Optimization  Possible switch over to Cement Roads
  33. 33. Swot Analysis Challenges:  Low Per Capita Consumption  High Incidence of Taxes  High Input Cost  Decline in Profitability  Inadequate Bulk Loading Facility at Ports
  34. 34. 1. Extraction of Raw Materials The raw materials are extracted from the quarry by digging the holes through machines in mountain. 2. Storage and Blanding of Raw materials 3. Raw Grinding and burning 4. Cement grinding and Storage 5. Packaging and delivering Production Process
  35. 35. Production Process
  36. 36. Production Process Criteria Dry process Wet process Hardness of raw material Quite hard Any type of raw material Fuel consumption Low High Time of Process Lesser Higher Quality Inferior quality Superior quality Cost of production High Low Overall Cost Costly Cheaper Physical state Solid Liquid Comparison of Dry and Wet Process
  37. 37. Product price Cement Price in Pakistan – 2017 (PKR) Price Rate : Rs. 520 – Rs. 540 Lucky Cement : Rs. 530/- DG Khan Cement : Rs. 535/- Meaple Leaf Cement : Rs. 540/-
  38. 38. Thank you