This is potentially cement industrys golden periodor from the looks of it, the sweet beginnings of a golden period. Despite reduced sales to international markets, total dispatches are growing by an average of 12 percent when this fiscal year kicked off when until FY15, growth in dispatches was less than 5 percent annually.
Demand projections are greatthere is a 10 million housing shortage and CPEC is likely to bring with it substantial infrastructure development which will fill a good portion of demand. The estimated growth per year for cement is between 10-15 percent and our conservative estimate of 12 percent suggest that by 2020, Pakistan will need 60 million tons of cement.
With the current capacity of 45 million tons, the cement players have been announcing expansion plans since 2016 with at least 10 firms now planning to take up the capacity to 68 million tons. According to statements made by All Pakistan Cement Manufacturers Association, expansions of at least 26 million tons are expected to come online in the next five years.
Already one expansion has come through: Cherat Cement with its 4500 tons per day new cement line is completed and even though there has been no official announcement as to whether production has started, the plant is most likely past the trial phase. Together with the new line, Cherat will have a functioning Waste Heat Recovery system to help with energy efficiency.
Two other announcements came through just this past week: Arif Habib groups Power Cement, a small cement manufacturer in the group with a capacity of 0.9 million tons will take up its capacity to 3.37 million tons with a new cement line costing Rs25 billion. This plant will be completed prospectively by FY19. The enhanced capacity will take Powers share in the industry to 5 percent of the total industry capacity and will make Power the second largest company in the South post-expansions. More power to power!
Meanwhile, Maple leaf cement announced it had placed an order with a Danish firm FLSmidth for the engineering and supply of equipment for its third cement line with a capacity of 7,300 tons per day at its plant site in Dadukhel Punjab. This new line will start trial production in FY19 as well.
The cement sector it seems is not playing around. Watch this space for more analysis in coming months.
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