CEMENT INDUSTRY OF PAKISTAN

Syeda Midhat Rizvi (20181-24596)

Amna Yousuf (20181-24226)
Maryam Arshad (20181-24401)
 HISTORY

• 1921 – cement plant was installed at Wah

• Slow development in the industry until

partition

• 1947 – 4 cement plants – wah, Rohri,

Karachi, Dandot

• Production capacity of half a million tonnes

• Growing demand – 2 more units

• Zeal Pak in Hyderabad, Sindh – originated

by provincial government

• Maple Leaf cement in Daudkel – originated

by Punjab provincial government

• Only 6 till 1965

 • Entry of private sector in the industry – 3 cement units
were added just a year later
Gharibwal Cement, Ismailwal,
Pind Dadan Khan Tehsil, • Javedan cement (Sindh), Gharibwal cement and
Chakwal District, Punjab Mustehkam cement (now Bestway) (Punjab)
Province,
• Nationalization policy halted growth and no new units
were added

• Government formed State Cement Corporation of

Pakistan (SCCP) in 1972 – for the management of
cement production

• SCCP installed 5 new cement manufacturing plants to

meet the growing demand for cement – with production
capacity of 1.8 million tons

• Denationalization policy – people regained trust and

invested in various sectors, especially housing and
construction

• Private investment – 7 new cement plants – 2.54 million

tons prod capacity

• SCCP initiated 4 new projects – 1.6 million tons

• By end of 1990, total prod capacity had risen to 8.5
million tons
• Privatization policy – initially 8 plants were
privatized
• SCCP lost control and share both, its supply went
down to 25% of the installed capacity of the country
• Still gap between demand and supply – cement was
being imported
• Long-run advantage of privatization was seen as the
production went surplus
• However, short, stagnant local demand – so the sales
are not very good and hence, the plants are not run at
their optimum capacity
• Underutilization domestically is a problem for
producers – so they go for exports in the
international market
• In only 2-3 months of 2012, 2 cement mills earned 4
billion in profit through exports via sea, transported
through Karachi port.

• Mills that couldn’t export faced loss of 10 billion

 WHERE IS IT
LOCATED
• The most important raw materials for
making cement are limestone, clay,
and marl. These are extracted from
quarries by blasting or by ripping
using heavy machinery.
• Majority of the cement mills located
in the northern side
• The Northern Zone: It consist of 19
units, with installed production
capacity of 36.17million tons. The
north makes 80 % of countries’
cement.
• The Southern Zone: It consists of 10
units. Installed production capacity of
this region is 8.8n9 million. The
Southern Zone produces 20% of
country’s cement.
• Mills in North - Can export to
Afghanistan and other central Asian
and landlocked countries ,
Kazakhstan, Azerbaijan etc.
• North Zone includes provinces of
Punjab, Khyber Pakhtunkhwa, Azad
Kashmir, Gilgit-Baltistan and
• parts of Balochistan while South
Zone includes provinces of Sindh and
Balochistan. There are 19 and 5
cement units in the North and South
Region, respectively.

• The cement industry in country has

acquired the shape of an oligopoly. It
evokes mix response among the
policy makers.
• The bright side is that the industry
can mount pressure upon the
government and effectively protest
the policies unfriendly to the industry.
 SIGNIFICANCE OF THE
INDUSTRY

• Direct and Indirect taxes – 30.0

Million
• Largest Employment industry
• 5th largest exporter
• Major export markets:
Afghanistan
India
Middle Eastern states
African countries
• Brings innovation and
technology from across the
world July 2020
PORTER'S FIVE FORCES
 BARRIERS TO ENTRY

● The business is expensive - high costs of

entry
● Huge players have advantage and control
market
● increasing costs of running the business
● threat of new entrants is low
 COMPETITIVE RIVALRY

● Highly competitive market

● Large and small players both
● Prices along the same line
● Exporters have more share
and say
 BARGAINING POWER OF SUPPLIERS

● Most manufacturers have captive limestone reserves

● Moderate supplier power
● Those manufacturers that depend on suppliers for limestone face costs
issues
● Enough power to stall the production
● Suppliers of coal, fuel and other material
 BARGAINING POWER OF BUYERS

● Very low
● Hold very little power in terms of price negotiation
● Cement is a prime component for construction of houses, transport etc.
● Cement also makes concrete
● Buyers have to buy it on price that the manufacturers offer
● However, cartels can affect negatively
 THREAT OF SUBSTITUTES

● Low
● No effective substitutes exist
in Pakistan
● Timber - used for light-
weight purpose
● High quality polyester resins
do not exist in Pakistan to
replace cement
● Other wood is cheap, though,
weak and unfit material to
replace cement
 •Strengths:

• contribution of Rs. 100 billion in the

SWOT ANALYSIS OF THE INDUSTRY GDP
• generates Rs. 30 billion of tax
revenue
• provides employment to more than
one hundred thousand people.
• considerable contribution in the
exports of Pakistan and consequently
earns foreign exchange for the
country.
• almost all the inputs like raw
materials and labours, required for
the production of cement, are easily
available in the vicinity or within the
country at cheaper rates
• surplus production capacity of
approximately 12 million tons of
cement
Weakness:

• utilizing only 5% of its installed production

capacity of 45 million tones
• Cement sales have been dormant at 22 million
tons per year for the last three years against
production capacity of over 43 million tons.
• lacking innovation which results in
insignificant inflow of modern technology
• sufficient funds are not available for setting
up new projects or upgrading the existing
plants.
• Banks provide very limited finance
• lacking professional expertise – concerns for
quality, cost reduction, marketing and
distribution channels
• no institution in the private sector that could
take part in research & development in the
cement industry in order to bring
 

Opportunities:

• The huge demand of cement in

housing sector
• Export of clinker and grey cement to
the countries like India, UAE, Qatar,
Middle East and some African
countries.
• The cement industry in association
with the authorities should consider
switchover to concrete roads. Though
the preliminary capital cost of these
roads is higher but the maintenance
cost is approximately nothing. This
would lead to fuel consumption.
Threats:

• Law and order situations across the north-

western and western border
• the per capita consumption of cement is
very low in the country i.e. Rs. 137 Kg
• Around 30 percent taxes on cement are
highest than other countries
• Increasingly high cost of input such as
electricity, coal, paper bags and mark-up
rates,
• Low level of prices of cement.
• The bulk-handing facility at ports is not
available in Pakistan; due to this cement
industry is not in a position to export to
new markets and countries in bulk
• the price of imported coal is very high
and quality of local coal supplied is
inferior and inappropriate
• The rising international prices of oil for
furnace
KOT DIJI’s limestone quarries
WHERE DOES IT COME FROM?

• Lime and gypsum are the two major inputs in the manufacturing of
cement.
Limestone (75%)
Gypsum (around 20%)
Clay (5%)
Iron ore (minimal)
• country possesses large reserves of Limestone and the annual
production is estimated at 8,698,573 metric tones
• Limestone is present in large amounts in the areas of Salt Range,
Potwar Plateau, Margalla Hills and Zinda Pir(Attock)
• country contains 4,850 million tons of Gypsum and the annual
production is calculated at 384,513 metric tons
• Gypsum deposits in the area of Dadukhel and Mianwali amount to
53 million tons.
• Other rich areas are Rakhi-Munh, khewra, Safed Koh-Rodo and
Suleman Range of D.G. Khan
 PROCESSING OF
CEMENT

• heating a mixture of limestone and clay until it

almost fuses and then grinding it to a fine powder.
• When mixed with water, the silicates and
aluminates in the cement undergo a chemical
reaction; the resulting hardened mass is then
impervious to water.
• It may also be mixed with water and aggregates
(crushed stones, sand and gravel) to form concrete
• The larger sized materials received at the plant are
crushed; mix in a proportion and ground to secure
a uniform blend for proper reaction.
• mixture usually of limestone and clay or other
suitable materials is subjected from powdered
form to solid in a kiln at a temperature of 1400-
1500oC.
• This product called clinker after cooling is ground
with 4-6% of gypsum or other forms of calcium
sulphate.
• The cement is then stored in a tower called silos
for shipment in bags or in bulk
A substantial amount of thermal energy is needed in its processing and
electrical energy is considerably consumed in the grinding of raw materials
and clinker.

Production of one ton of clinker requires the combustion of about 80-90

liters of heavy oil or 80-100 cubic meters of natural gas or 150-180
kilograms of coal.

An average electric energy consumption for one ton of cement produced in

a suspension kilns is 100-105 kwh, though power consumption from 80 to
85 kwh and even to 70 kwh is possible with the latest efficient equipment
and machinery.
 LABOR

● Labor training
● Foreign experts

● Skilled labor:
● Electrical engineers
● Mechanical engineers to operate machines,
kilns
● Chemical and civil engineers for controlling
● Administration

● Unskilled:
● Packaging
● Loading/Unloading
● Transportation
 CAPACITY AND COMPETITION

• Production capacity of cement

manufacturers has more than doubled
over the last decade to 45.6m MT/annum
• Top 5 cement manufacturers (Lucky,
Bestway, D.G. Khan, Fauji & Maple
Leaf) make 58% of total installed
capacity.
• Average capacity utilization over the last
decade has ranged from 73% to 89%
• With highest ever monthly dispatches of
3.58m tons during March’2016, capacity
utilization stood at a healthy 95%.
• Capacity utilization for South Zone
players is higher than North
• Export dispatches represent around one-
third of total dispatches for South
players vis-à-vis one-tenth for players in
the North Zone
 LEGAL ISSUES

● the sector was penalized with a 3% increase in sales tax to 18% and an
increase in excise duty to 35%.
● Passing down the cost to consumers, however, won’t run in the long-term
● Political interference
● Large players control the market, entry to the industry high
 INTERNATIONAL REGULATIONS

• Airborne SO2 reacts with water vapour to form sulphuric acid

(H2SO4). This contributes to acid rain, negatively affecting water
sources, forests and crops. SO2 is also a potent greenhouse gas.
• SO2 is emitted from cement plants via two main processes:
• 1. Sulphite impurities in the limestone and other raw materials; 
• 2. Elemental sulphur contained in fuels, particularly coal and some
alternative fuels.
• Most national limits for SO2 are in the region of 200 - 500mg/Nm­3.
• There are some significantly higher limits in developing nations.
Particularly high levels are permitted in Nigeria (2000mg/Nm3) and
Pakistan (1700mg/Nm3)
• Nitric oxide (NO) and nitrogen dioxide (NO2)
are both ozone depleters. Both gases are
precursor compounds to nitric acid (HNO3),
which contributes to acid rain, negatively
affecting water sources, forests and crops.
• The range of maximum permissible emissions
is broad, stretching from 200mg/Nm3 for some
sets of conditions within the EU, to
2500mg/Nm3 
• relatively low NOx limits include new plants in
China (400mg/Nm3) and certain types of
kiln/fuel combination in Pakistan
(400mg/Nm3).
• Pakistan’s emission ranges from 400-1200mg/
Nm3

• Pakistan's NOx limits are dependent on fuel

type:
Gas = 400mg/Nm3,
Oil = 600mg/Nm3,
3
INTERNATIONAL MARKET
 INTERNATIONAL MARKET

Cement being one of the major raw material for manufacturing, its usage and demand has increased over
the years alongside its production. The global volume for cement in 2020 was recorded at 5.17 billion
tons and is expected to grow even more over the years reaching up to 6.08 billion tons by 2026.
Cement’s most general usage is in construction of houses, buildings, industrial estates etc. The cement
industry is divided into blended, Portland and others. Depending upon the final product, the cement is
segmented into use for residential and commercials individually.

The development of infrastructure projects is the most prominent reason for the high demand for cement
industry. Projects such as construction of Al Maktoum International airport in Dubai and South-North
transfer project in China, are likely to boost the sales of cement.
The emergence of thermal energy in the production of manufacturing of cement results in low carbon
footprint, due to which this process in now being adopted in a lot of places, which further gives rise to
cement demand.
 INTERNATIONAL MARKET (CONTD.)

The main regional markets of the industry are North America, Latin America, the Middle East,
Africa, Europe and also Asia Pacific. While the main players of the industry are CEMEX S.A.B. de
C.V., Heidelberg Cement, CNBM International Corporation, Inter Cement, and Ultratech Cement
Limited (Aditya Birla Group), among others.
Owing to Pandemic declared by WHO, which derailed the economic activity largely, caused a pause
in the manufacturing and production activity as well, due to which cement industry also faced the
blow, however it wasn’t so bad and the demand actually bounced back largely because of the major
demand from China.
While the pandemic still continues, and with an unclear picture of the future, the global demand for
Cement seems to have quite a good growth with a V-shaped recovery.
COMPETITION IN THE INDUSTRY
 COMPETITION

According to researchers conducted by CEMTEC, Pakistan is prioritized amongst the top 3

cement producers is the world, whereby demand is constantly increasing for the cement industry.
1. Lucky Cement
Lucky cement being one of the largest producers and exporter of cement in Pakistan is also listen
on the Pakistan stock exchange. Over time, the company has expanded its operations through
opening up of different production facilities at key locations in Karachi to cater to Southern and
Northern regions.
2. Cherat Cement
Cherat company limited was inaugurated in 1981 with the main business as manufacturing,
marketing and sale of Ordinary Portland Cement and Clinker. The company’s plants are located
in Lakrai, Nowshera, and KPK and the company is amongst the top ones in the cement industry
of Pakistan and also number 1 cement producer in the region with an annual capacity exceeding
4.5 million tons. The company is ISO certified and also listed on PSX.
 COMPETITION

3. Pioneer Cement
Pioneer cement incorporated in 1986 as a public limited company is listed on the stock exchange. The plant is located at Chenki, District
Khussab. The company is committed to follow a set of procedures to maintain a stringent quality at every stage of cement production.
The main 2 types of products that the company deals in are Ordinary Portland cement (it is most commonly and widely used cement,
which is used in concrete construction). The other one is the Sulphate resistant cement (which is used largely in the resistance of
destructive attack of sulphates).

4. Attock Cement
ACPL Falcon Cement, Attock Cement, since inception has gained new heights everyday with continuous efforts to modernize the plant
and improve its efficiency. ACPL has successfully managed to make its place not only locally but also in international market by selling
high quality products. They have managed to export huge quality of clinker to international countries.
 DG KHAN CEMENT

D.G Khan Cement company limited, is considered to be amongst the largest of the cement
manufacturers of Pakistan having 4 plants located in Dera Ghazi Khan, Khairpur, Distt. Chakwal and
Hub Lasbela. The total production capacity is 22,400 tons per day (6.72 million tons/ annum).Further,
the company is also listed on Pakistan stock exchange.

HISTORY OF THE COMPANY

The founding member of the Nishat group, Mian Muhammad Yahya started his journey of entrepreneurship
from cotton export house and soon went into ginning, cotton and jute textiles. In such short period he achieved
so much. The Nishat group went from Cotton exporters to premier business group of the country.
DG Khan Cement, a public limited company incorporated in Pakistan is also listed on the stock exchange. It is a
blue-chip stock. The company largely manufactures and sales Clinker, ordinary Portland cement, and sulphate
resistant cement. DG Khan Cement is mostly owned by Nishat Group (49%) followed by group companies
(32%) and other is sponsored family members, general public and other corporates.
 DG KHAN CEMENT

MARKET SHARE / TECHNOLOGICAL STATE

DG Khan being one of the top companies of cement industry of Pakistan has a strong
position owing to its rating and representing a market share of 12% in terms of installed
cement capacity.
There had been a splendid growth in the sector over the five-month period with 28.6 million
tons in the first half of the current fiscal year largely because of exports in the Bangladesh
market where cement sector has seen a large growth since a lot of volume of cement and
clinker was being exported to Bangladesh. This is largely happening cause of DG Khan’s
Hub plant which is exporting sizeable volume of clinker to Bangladesh and the plant is also
achieving the optimal level of capacity utilization. Further a drop in coal prices acted as a
fortune for the industry as well.
 DG KHAN CEMENT

MAIN PRODUCTS:

1) ORDINARY PORTLAND CEMENT

The ordinary Portland cement is dispatched to customers with premium quality with no room for
defects and it has great strength which is acceptable for national as well as international standards,
and quality control is done through computer-controlled systems and online X-ray analyzer.

1) SULPHATE RESISTANT CEMENT

The Sulphate resistant cement is famous for low C3A content. DG Sulphate resistant cement has a
much lower C3A content, due to which it is quite effective against Sulphate attacks. DGKC Sulphate
resistant cement exceed standards of even Ordinary Portland cement when it comes to strength.
 FINANCIAL POSITION

In 2021, due to a smaller number of kiln operation days there was a slight decline in the clinker
production. This was due to the shut down in the first quarter of the financial year. Plant capacity for
102% last year went to 93% in 2021.

In the second half of 2021, power plant at Hub became operational which saved significant power cost.

In Pakistan, DGKC is the third largest cement manufacturer and the only company having production
facilities stretched from North to Center to South. Analysis of the data reveals that gross local cement
sales increased due to betterment in cement sales price generated out of country wide demand.
This was largely owing to construction amnesty announced by government, good yielding of important
crops, and the focus of government on large and small dams, further loans for housing sector and
industrialization acted as a demand pull.

Admin and selling expenses % to sales decreased cause of increase in sales, and admin expenses
decreased only by 1.8% while selling expenses increased owing to increase in clinker sales.
 FINANCIAL POSITION

Cost of sales for 2021 decreased to 82.1% as compared to last year it was 95.8% while the gross profit
margin increased from 4.2% to 17.9% owing to stable sale prices. Since clinker and cement production was
low, hence manufacturing cost remained low as well. Although coal prices started rising, its consumption
cost remained low and the effect of rising prices of coal might come more in 2022.

Finance cost since is linked to the level of borrowing and interest rates hence interest rates dropped during
FY21.

Current assets account for 27% of total assets while current liabilities account for 29%. Net working capital
also improved slightly. Due to piling up of coal inventory, stores and spares increased, Further, trade and
other payables also increase. However, owing to better collection of debts, trade debts registered a decline.

Company’s contribution to equity as of total assets is 53.29%. Equity recovery was largely due to net profit
of 3,721 million and due to increase in value of investments in Nishat motors.
 PEST ANALYSIS

POLITICAL:

· Owing to government policies and actions in the economy, it can adversely impact the business.
· Political instability, changes in government decisions constantly and transition of government impacts
organization as well.
· Fluctuations in government’s macroeconomic policies further affect the company’s business.

ECONOMIC:

· Economic factors tend to play an important role whereby production has a large impact owing to extensive
competition in the cement industry, fluctuation of interest rates making investment hard, followed by
devaluation of currency and high inflation rates negatively impacting the construction sector and in turn
impacting cement industry.

· Owing to the pandemic hitting the world, globally construction activities slowed down, which resulted in
lower economic growth. Moreover, government’s development spending was also lowered due to lack of
finances and investments which again impacted the industry negatively.
 PEST ANALYSIS

SOCIAL:

· Companies try to focus on corporate social responsibility to build a good brand image through donations and development of
communities as part of CSR. These factors contribute to the wellbeing of the company and are important for companies to thrive
in the market.

TECHNOLOGICAL:

· Risk of machines obsolescence and maintenance and advancement in technology constantly contributes to the problems in the
cement sector as well.
· Especially when there is technological innovation by competitors add to the problem for the industry again.

ENVIRONMENTAL:

· Environmental factors like climate changes, natural disasters, global warming etc can hamper the production of cement as well.

LEGAL:

· Legal factors like complying with the legal and regulatory requirements alongside adhering to them through taxation and legal
procedures is important for the company to carry out its operations smoothly.
 SWOT ANALYSIS

Strengths:
· Strong brand recognition
· Strong financial position
· Quality and efficiency of human resources
· Trusted and efficient supply chain
· Geographically diverse & state-of-art production facilities

Weaknesses:
· Highly fragmented industry
· Demand supply gap, overcapacity
· High taxation and duties
· High energy cost and inflation
· High interest rates
· Tough competition in local market
 SWOT ANALYSIS

Opportunities:

· Future growth potential due to emphasis on construction industry

· Emerging export markets
· Export opportunities due to fully operational HUB facility
· CPEC led growth opportunities

Threats:

· Overcapacity affecting the margins

· Devaluation of money
· Inconsistent economic policies
· Protectionism
· Covid-19 impact
· Rising cost of logistics
· Rise in coal & fuel prices
 GOVERNMENT IMPLICATIONS

● Implements groundwater charge for cement producers

● To commence plant building within six months of No Objection Certification
● Issued 22 no-objection certificates for upcoming cement plants
● Extends fixed tax regime for construction industry to 31 December 2021
● Interest rate was decreased
● Government has allocated firms
● Increased limit for transactions
● Government has reduced the federal excise duty (FED)
 FUTURE OF THE INDUSTRY

● Cement Production in Pakistan is expected to be 4800.00 Thousands of Tonnes by the end

of this quarter, according to Trading Economics global macro models and analysts
expectations.
● In the long-term, the Pakistan Cement Production is projected to trend around 4000.00
Thousands of Tonnes in 2022, according to our econometric models.Cement Production in
Pakistan averaged 2546.22
● Thousands of Tonnes from 2003 until 2021, reaching an all time high of 5121 Thousands
of Tonnes in October of 2020 and a record low of 864 Thousands of Tonnes in May of
2003.
 PROBLEMS AND SOLUTIONS OF THE INDUSTRY

1. Lack of innovation technology development:

2. Absence of vision to identify weakness
3. Lack of funds to take up new projects
4. Lack of professional expertise in the country
5. Dependence on cartelization for sufficient revenue
6. Lack of research and development