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Pakistan Cement News

Pakistan Cement News

Pakistan plans new cement capacities for its northern zone

Pakistan’s five big cement manufacturers are in the process of raising total production capacity in the northern zone, targeting 73.6Mta by 2024 from 54.1Mta of 2021, expanding at an average annual growth of 12 per cent to meet the expected robust demands in Punjab and NPK provinces. In addition, the extra capacity will benefit land export opportunities to Afghanistan and India.

The north zones expansion plan includes Lucky Cement raising capacity at its Pezu facility to 9.8Mta from 6.64Mta, Maple Leaf Cement rising to 8.30Mta from 5.87Mta, DG Khan Cement moving to 7.40Mta from 4.20Mta, Kohat Cement climbing to 11.60Mt from 5.30Mt, and Fauji Cement Co expanding to 5.60Mt from 3.60Mt in 2021.

Lucky Cement has announced a 3.15Mta brownfield expansion at its Pezu Plant in Khyber Pakhtunkhwa, which will increase company production capacity at a national level to 15Mta and maintain its position as the largest cement producer in Pakistan. The project has broken ground and the completion date is December 2022.

Maple Leaf Cement (MLCF) has also announced a brownfield expansion that will help it increase its future market share by 2.43Mta.

DG Khan Cement Co (DGKC) announced in a financial briefing that it would place its expansion plan on hold for now, and the priority will be to pay off debt by PKR6bn (US$ 33.9m) during FY22.

Kohat Cement Co (KOHC) is planning to build a 8000-10,000tpd greenfield project, which is estimated to cost PKR25bn (US$141.8m), of which PKR10bn will be financed through internally generated equity while the remaining PKR15bn will be funded through debt. The plant is expected to reach its commercial operation date (COD) in FY24. The company is also working on optimising the pyro process of Line-3, which will reduce fuel and power costs. The total cost of the project is PKR1.2bn and will be financed through a combination of debt and equity.

Fauji Cement Co (FCCL) has announced a greenfield expansion of 2.05Mt at DG Khan (Punjab). FCCL may potentially become the third largest cement player in the country with over 8Mta after the COD of the new plant.

Attock Cement Pakistan (ACPL) announced a cement expansion of 4250tpd, which is expected to come online by 1QFY23. The total cost of development is estimated to be PKR15bn and will be financed with a combination of debt and equity. The solar plant of 20MW is expected to come online by 2QFY22, reducing power costs.

Gharibwal Cement Ltd (GWCL) has announced a 3Mta expansion. A contract has been signed with FLSmidth for the supply of the new pyro line. The PKR2bn contract with FLSmidth is for design and engineering, while the equipment cost has not been finalised but could cost in the range of PKR8-10bn. Equity debt has not been completed yet. Civil works for the project will commence soon, and the project timeline is two years. Equipment will start arriving at the end of FY22.

Pioneer Cement Ltd (PIOC) is evaluating a further plant expansion and location, but debt reduction is the primary focus at present, with the company set to retire PKR4.5bn long-term debt in the FY22. PIOC has already received approval for the plant in DG Khan.

The Punjab government is pressurising companies to proceed swiftly with their expansion plans and has warned cement manufacturers that ‘No Objection Certificates’ (NOCs) granted for the installation of the new cement plants in the province could be cancelled if they fail to initiate the projects at the earliest opportunity.

Pakistan’s Cement exports fall during 4MFY21-22

Pakistan’s Federal Bureau of Statistics (FBS) reported a 38 per cent fall in exports in terms of dollar value and a 44.2 per cent decrease in export volumes in the 4MFY21-22 when compared with the year-ago period. The cement industry earned US$65.45m of export revenue by dispatching 1.804Mt of cement and clinker overseas, compared with US$105.54m from 3.233Mt of exports in the 4MFY21-22. In local currency terms, exports sales declined 37.6 per cent YoY to PKR10.89bn.

In October 2021 alone, export revenues declined to US$10.24m on the shipment of 248,833t from US$33.81m on the export of 1.02Mt cement and clinker exports in Sept 2022. This translates export down by 69.7 per cent and 75.6 per cent MoM in terms of value and quantity, respectively. Similarly, when compared with October 2020, when exports stood at US$33.24m on the shipments of 1.027Mt, exports declined by 69.2 per cent in value and 75.8 per cent in quantity YoY.

AKD research pointed out that local sales are expected to remain strong while export contracts are likely to happen moving forward. However, the margin on export is expected to decline significantly given the increasing cost of coal while export prices remain the same.

Production in 3MFY21-22
The overall output of the Large Scale Manufacturing Industries Index (LSMI) increased by 5.2 per cent for July-September 2021-22 compared to July-September 2020-21. However, the local cement production recorded a mixed trend, FBS estimated. Likewise, the LSMI output increased by 1.2 per cent for September 2021 compared to September 2020 and decreased by 0.72 per cent compared to August 2021.

During three months of July-September 2021, Pakistan’s cement production advanced by 1.6 per cent, YoY to 11.496Mt compared to 11.310Mt a year earlier. However, cement production fell in September 2022 alone, when production slid by 2.4 per cent to 4.04Mt versus 4.143Mt in the same month last year.

FCCL to become the third-largest player in the country

Fauji Cement Company Ltd (FCCL) informed the Pakistan Stock Exchange (PSX) on 18 November that its Board of Directors has approved the process of amalgamation of Askari Cement Ltd into Fauji Cement Co Ltd and its placement before the shareholders in the Extraordinary General Meeting of the company as Special Business for their approval as per requirements of the Companies Act of 2017.

While commenting on the amalgamation, AHL Research stated that, pertinently, Askari has a cement capacity of 2.8Mta against FCCL’s current capacity of 3.43Mta. This implies an 82 per cent addition to existing capacity, which, together with FCCL’s announced greenfield expansion of 2.05Mta in the north (DG Khan, Punjab) and ACL’s brownfield expansion of 2Mta, will render FCCL to become the third-largest player in the country with a capacity of 10.3Mta.

Post-merger and expansion, ACL will add 47 per cent to the total capacity (4.9Mta out of the total 10.3Mta) in the new entity, whereas its current owners will hold nearly 37 per cent in shareholding (800m shares out of 2180m shares). Albeit, this deal will be beneficial for both ACL and FCCL, as the company’s cumulative market share will aid its augmented presence in North (third largest capacity in the region after Bestway Cement Ltd expands by 2.16Mta to 12Mta and Lucky Cement expands by 3.15Mta to 15Mta).

Cement sector pledges to decarbonise Pakistan

KARACHI: Pakistan Business Council (PBC) hosted a virtual session with British High Commission and Embassy of Italy to discuss the pathways for the decarbonisation of the country’s cement sector.

This webinar comes at a time when the world leaders have huddled in Glasgow to discuss sustainability and growth without compromising everyone’s collective future. Speaking at the moot, Mike Nithavrianakis, British Deputy High Commissioner and Director of Trade, said, “Next to water, concrete is the second-most consumed substance on earth; on average, each person uses nearly three tonnes a year”.

According to Nithavrianakis, the concrete industry uses about 1.6 billion tons of Portland cement to produce 12 billion tons of concrete a year and accounts for 7-8 percent of greenhouse emissions. Ehsan Malik, CEO PBC, said, “The investment in infrastructure and the construction packages of the government will entail substantial increase in the use of cement in Pakistan, so we need to think about climate-resilient ways of production”.

Muhammad Ali Tabba, CEO Lucky Cement Limited and President of All Pakistan Cement Manufacturers Association said, “In a bid to achieve green growth going forward, the industry globally will have to adapt to climate change challenges and rework business models to ensure environmental stewardship and robust growth and the cement industry in Pakistan is committed to playing its role”. Faustine Delasalle, Co-Executive Director, Mission Possible Partnership and Director, Energy Transitions Commission explained, “There are essentially three routes, which need to be taken to meet the increasing demand whilst reducing emissions in the cement sector”. “The first being a need to relook at using materials efficiently, the second being improving energy efficiency and the third being employing new technologies to cut emissions,” Delasalle added.

According to the statement, Pakistan’s leading companies are also committing to reduce carbon emissions by disclosing their pledge openly. More than 28 companies from various sectors have signed the pledge letter to the ‘Business Ambition to 1.5 Degrees’ – and are ready to embark on the journey to reduce Carbon emissions to 50 percent by 2030.

Cement dispatches drop by 9.07pc in October

ISLAMABAD: Due to the continuous increase in cost of doing business plus devaluation of local currency against dollar, cement dispatches are showing a declining trend for the past few months.

As per details, cement dispatches declined by 9.07 percent in October 2021. Total Cement dispatches during October 2021 were 5.214 million tons against 5.735 million tons dispatched during the same month of last fiscal year.

According to data released by All Pakistan Cement Manufacturers Association (APCMA), local cement shipments by the industry during the month of October 2021 were 4.603 million tons compared to 4.859 million tons in October 2020, showing a reduction of 5.29 percent.

Exports dispatches suffered a massive decline by 30.09 percent as the volumes reduced from 875,266 tonnes in October 2020 to 611,884 tonnes in October 2021.

In October 2021, North based cement mills dispatched 3.831 million tonnes cement in domestic markets showing a decline of 8.01 percent against 4.164 million tonnes dispatched in October 2020. The South based mills dispatched 771,755 tonnes cement in local markets during October 2021 that was 11.01 percent higher compared to the dispatches of 695,221 tonnes during October 2020.

Exports from North based mills massively declined by 74.03 percent as the quantities reduced from 283,389 tonnes in October 2020 to 73,608 tonnes in October 2021. Exports from the South also decreased by 9.06 percent to 538,276 tonnes in October 2021 from 591,877 tonnes during the same month last year.

During the first four months of the current fiscal year (4MFY22), total cement despatches including domestic and exports were 18.039 million tonnes, which calculates to 6.68 percent lower than 19.331 million tonnes dispatched during the corresponding period of last fiscal year.

Further analysis indicate that domestic uptake of the commodity slightly increased by 1.1 percent to 15.882 million tonnes from 15.713 million tonnes during July-October 2020 whereas exports during the same period declined by a massive 40.4 percent to 2.157 million tonnes from 3.617 million tonnes during July-October 2020.

North based Mills dispatched 13.314 million tons cement domestically during the first four months of current fiscal year showing a decline of 2.3 percent than cement dispatches of 13.627 million tons during July-October 2020. Exports from the North declined by 49.06 percent to 461,275 tons during July-October2021 compared with 905,575 tonnes exported during the same period last year.

Domestic dispatches by South based Mills during July-October2021 were 2.56 million tons showing a healthy increase of 23 percent over 2.08 million tonnes of cement dispatched during the same period of last fiscal year.

There was, however, a massive decline of around 37.45 percent in exports from the south zone as the volumes reduced to 1.696 million tonnes in the first four months of the current fiscal year from 2.712 million tonnes during corresponding period of last fiscal year.

Official spokesman of All Pakistan Cement Manufacturers Association (APCMA) claimed that continuous increase in input costs coupled with recent hike in rupee to USD parity are major concerns for the industry. These price escalations are seriously affecting the cost of doing business in local as well as international markets.

Pakistan: 3MFY2021-21 exports mixed

Pakistan’s Federal Bureau of Statistics (FBS) has released cement and clinker export data for the first quarter (July-September) of FY2021-22. Both value and quantity of exports slid during this period on a cumulative basis compared with the equivalent months in FY20-21, but growth was recorded MoM.

Between July-September 2021, Pakistan’s cement industry earned US$55.2m of export revenue by dispatching 1.555Mt of cement and clinker overseas, compared to US$72.29m from 2.206Mt of exports in the year-ago period. The export figures represent a significant fall of 23.6 per cent in dollar terms and 29.5 per cent in volumes YoY, as reported by FBS. The same pattern was also noticed in local currency despite the depreciation of the Pakistani rupee against the US dollar during this period. The export value decreased by 24.2 per cent to PKR9.13bn (US$55.2m) from PKR12.05bn during 3MFY21-22.

However, in September 2021 export revenues rose to US$33.81m and volumes to 1.02Mt from US$9.42m and 235,203t1t, respectively during this reporting period. This export indicates a growth of 258.8 per cent and 334 per cent in terms of value and volume, respectively. Likewise, the export volume in September 2021, if compared with US$27.78m earned on the export of 820,107t in September 2020, represents a growth of 21.7 per cent and 24.5 per cent YoY.

Local research house, AKD Securities Ltd, while reviewing the export performance of the first three months of Pakistan, reports that exports were hit due to an increase in freight rates and a shortage of vessels has created supply chain bottlenecks. In addition, political uncertainty in Afghanistan has slowed down exports to Afghanistan while export to India is still suspended. However, the north contributed most to the decline in export during this period.