Professional Documents
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cement industry
Published in Jan-Feb 2016
By Marylou Andrew
For Pakistan's cement industry's growth, much will depend on how the
economy performs and the government responds.
With the prices of coal (the fuel used in cement production) in decline from $140 per ton to
$70 and now to $52 per ton, the cost of producing cement is lower and this makes most
cement manufacturers optimistic about the future, although they are adamant that the
government must reduce sales tax and excise duties to make the product even more cost
effective.
It is therefore just as well that although exports have dwindled, there has
been an upsurge in local demand. The announcement of the China-Pakistan
Economic Corridor (CPEC), a $46 billion mega project, which will include
infrastructure development projects across Pakistan and the lowering of
real estate prices which has led to the initiation of several new housing
projects - are the two major reasons for increased local demand.
Mohammad Fazlullah Shariff, CE, Thatta Cement, says that about 60% of
the cement produced in Pakistan at present is used in infrastructure
projects, and the housing sector accounts for the remaining 40%. However,
Syed Muhammad Anwar, CEO, Dewan Cement, is of the opinion that the
reverse is true.
Real estate and builders are consuming 70% of cement while 30% is used
in infrastructure.
Irfan Sheikh, Director Finance and CFO, Bestway Cement, tends to agree
with Anwar and says that the lions share of business is coming from the
housing sector. This makes sense considering that according to news
reports from May 2015 (Source: The News), Pakistan faces a housing
backlog of nine million units, particularly for poor and disadvantaged
people and the government has announced several plans to address this
shortfall.
This combination of increased demand from housing and infrastructure has
in a way forced cement manufacturers to shift their focus to the local
market. Some, like Lucky Cement, initiated mass media advertising
campaigns in 2012 to build up their brand image not only with
contractors and builders who are generally the decision makers when it
comes to choosing a brand of cement, but also with customers building
their own homes. Others, like Bestway (which is also advertising now),
have introduced new products, such as bonding agents and tile grout in
addition to their existing cement product lines to establish a USP of sorts
for themselves.
about the future, although they are adamant that the government must
reduce sales tax and excise duties to make the product even more cost
effective and ensure growth over the next few years.
As Shariff points out, cement is an important industry for an agrarian
economy like Pakistan; it generates a lot of employment and therefore it
makes sense for the government to focus on this industry.
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