'Pakistan Cement Industry\r'

'Compiled by: Mirza Rohail B http:// sparingpakistan. wordpress. com/2008/02/12/ cementumumum- diligence/ storey & Introduction Growth of cement effort is rightly considered a barometer for economic activity. In 1947, Pakistan had inherited 4 cement plants with a complete ability of 0. 5 cardinal haemorrhoid. Some expansion took place in 1956-66 unless could not keep pace with the economic increase and the arena had to resort to events of cement in 1976-77 and continued to do so till 1994-95. The industry was privatized in 1990 which led to setting up of b atomic number 18-ass plants.\r\nAlthough an oligopoly commercialise, thither exists fierce competition between members of the engagement right away. The industry comprises of 29 firms (19 units in the northeast and 10 units in the s starth), with the installed production capacity of 44. 09 one one thousand zillion million million stacks. The north with installed production capacity of 35. 18 million oodles (80 share) part the south with installed production capacity of 8. 89 million lashings (20 percent), compete for the domestic trade of oer 19 million heaps. There are four foreign companies, ternion armed forces companies and 16 private companies listed in the stock exchanges.\r\nThe industry is shared out into two broad regions, the northern region and the southerly region. The northern region has near 80 percent share in positive cement dispatches dapple the units establish in the southern region contributes 20 percent to the annual cement gross gross sales. cementum industry is indeed a highly important sepa send of industrial sector that plays a pivotal map in the socio-economic growing. Since cement is a specialized product, requiring advanced(a) infrastructure and production location. Mostly of the cement industries in Pakistan are located near/ at bottom rough regions that are rich in clay, iron and mineral capacity.\r\n cement industries in Pakistan a re shortly operate at their maximum capacity due to the brandish in commercial and industrial construction within Pakistan. The cement sector is contributing above Rs 30 meg to the res publicaal exchequer in the haoma of taxes. cementum industry is excessively serving the nation by providing job opportunities and presently more than 150,000 persons are employed directly or indirectly by the industry. The industry had exported 7. 716 million tons cement during the course 2007-08 and had earned $450 million, while is evaluate to export 11. 0 million tons of cement during 2008-09 and earn near $700 million. Fiscal Performance 2008-09 Business Recorder inform that Pakistan’s cement exports witnessed a healthy harvest-home of 65%, to over 6 million tons during 7 months of the current mo authorizeary course of instruction in general due to rise in international demand. The exports whitethorn reach to 11 million tonnes and earn approx $ 700 million during 2008-09. Th e statistics of All Pakistan cementum Manufacturers fellowship similarly showed that cement exports had mounted to over 6 million tons in 7 months as compared to 3. 2 million tons of same completion of pop off fiscal year, depicting an addition of 2. 38 million tons. Cement exports during January 2009 went up by 30% to 0. 81 million tons as compared to 0. 623 million tons in January 2008. However, slow construction activities in the country during the period badly upset domestic sale of cement, which visualized decline of 15%, to 10. 77 million tons as compared to 12. 59 million tons of abrogateing-place fiscal year. On MoM basis, local dispatches of cement during January 2009 showed a decline of 8%, to 1. 51 million tons from 1. 65 million tons of January 2008.\r\nboilersuit dispatches, including export and local sales, reached 16. 77 million tons during July to January of 2008-09 as against 16. 20 million tons of last fiscal year, depicting an fixth of 3%. By September 2009, after witnessing substantial suppuration in all three shadows of fiscal year (FY) 2008-09, cement sector concluded the fourth quarter with a handsome harvest of 1,492 percent on one-year basis, All Pakistan Cement Manufacturers Association’s report revealed on 29th September 2009. high retention prices (up 59 percent) and high rupee base export sales amid rupee depreciation (20 percent) hatch profits up north.\r\nHowever, this growth is magnified, as FY2007-08 was an abnormally low profit period for the sector. Moreover, the performance is skewed towards large players with export potential as useful companies in both years affix increase of just 109 percent, said analyst at JS investigate Atif Zafar. He said that cumulative profitability of companies in FY09 stood at Rs 6. 2 billion or $78. 2 million as compared to Rs 386 million or $6. 2 million depicting a massive growth of 1,492 percent. Companies with profits in both the years posted 109 percent earnings improvement.\r\nThough total dispatches were have 2 percent, net sales grew by 55 percent to Rs 101. 4 billion or $1. 3 billion on the back of high net retention prices (up 59 percent) and improved export based revenues. Cost of sales/tonne also rose by 33 percent on yearly basis amid higher realised coal prices and inflationary pressures, the analyst maintained. Production Capacity In Pakistan, there are 29 cement manufacturers that are acting a vital role in the structure up the country’s economy and plowshare towards growth and prosperity.\r\nAfter 2002-3, most of the cement manufacturers grow their operations, and change magnitude production. This sector has invested about $1. 5 billion in capacity expansion over the last six years. The operating capacity of cement in 1991 was 7 million tons, which increased to be be intimate 18 million tons by 2005-06 and by end of 2007 rose to above 37 million tones, and presently the production cpapacity is 44. 07 million tonne s. Cement production capacity in the north is 35. 18 million tons (80 percent) while in the south it is only 8. 89 million tons (20 percent).\r\nThe cement manufacturers in 2007-08 added above eight million tons to the capacity and the total production was expected to exceed 45 million tons by the end of 2010. It may end point in a supply glut of cardinal million tons in 2009 and 2010. Actual Cement Production (in million tons) According to authorities plank of Investment, 2001-02 †9. 83 2002-03 †10. 85 2003-04 †12. 86 2004-05 †16. 09 2005-06 †18. 48 2006-07 †22. 73 2007-08 †26. 75 2008-09 †20. 28 Exports & International Markets The cement industry of Pakistan entered the export markets a few years back, and has give its reputation as a good tonus product.\r\nDeregulation after accession of Pakistan to WTO is expected to open the window of competition from cheaper markets. The recent acquisition of Chakwal Cement by an Egyptian gi ant, Orascom may be a beginning of such an entry in Pakistan by multinationals. New avenues for export of cement are porta up for the indigenous industry as Sri Lanka has deep shown interest to import 30,000 tons cement from Pakistan all month. If the industry is able to avail the opportunity offered, it may secure a significant share of Sri Lanka market by supplying 360,000 tons of cement annually.\r\nIn 2007, 130,000 tons cement was exported to India. In 2007, the exports to Afghanistan, UAE and Iraq touched 2. 13 million tons. At present, the economies of major countries are go about recession, but Pakistan’s cement sector is mute maintaining a healthy growth. Cement export to India has already slowed after imposition of trading by Indian authorities. Pricing Another problem faced forward by the Industry was the high taxation. The general sales tax (GST) was 186% higher than India. The impact of this tax and certificate of indebtedness structure resulted in almost 40% increase in the follow of a cement groundwork (50 Kg).\r\nA stunner in India earlier cost Rs. 160 as compared to Rs. 220 in Pakistan. In the reckon of 2003-04, a traffic cut of 25% was permitted to the cement sector with assurance from the cartel to pass on this benefit to the consumers. In 2006, the price of a bag went up to Rs. 430 however in 2007 it has stabilized at Rs. 315 per bag. In mid 2008, cement prices stabilized notwithstanding at Rs. 220 per bag. The Government has reduced central scratch up duty (CED) on cement in the compute for 2007-08 in order to boost construction activity. sightly industry cost of cement bag/50Kg = Rs. 193\r\n fair(a) industry price of cement bag/50Kg = Rs. 235 home(prenominal) Demand Local demand in the country for the year 2008-09 is expected to be around 20 million tons. Domestic demand is expected to grow at 13% Capacity growth rate (CAGR) during next five years. Certain factors will also affect the growth of cement industry as w ell. These are as follows: Strong gross domestic product growth O Higher GDP growth has compulsory impact on cement demand. O Cement demand growth rate was double the GDP growth rate in last three years. admit sector growth O Housing projects consume roughly 40% of cement demand.\r\nO Low interest rates, post 9/11 remittances’ inflow, and real estate boom have helped trapping sector growth. Government Development Expenditures O Government development expenditures count for one third of total cement economic consumption. O Increase in PSDP †from Rs. 80 bn in 1999 to Rs. 520 bn in 2007. O Infrastructure development in a region triggers private development projects having even positive impact on cement demand. Earthquake Rehabilitation O Earthquake losings of October 8th are estimated at $ 5. 2bn O reconstructive memory work will boost construction physical demand\r\nO Reconstruction work is expected to contract cement demand of 4mn tons over next 3-4 years Announceme nt of large Dams O Construction of four large dams will generate demand of 3. 7mn tons. Bhasha Daimer Dam, Munda Dam, Akhori Dam and Neelum Jhelum. Per Capita Cement Consumption Pakistan currently has a per capita consumption of 131kg of cement, which is comparable to that for India at 135kg per capita but substantially below the World Average 270kg and the regional average of over 400kg for peers in Asia and over 600kg in the Middle East.\r\nCement demand remained stagnated during 90’s owing to lack of development activities. In 1997, per capita consumption was 73 kg in both Pakistan and India. By 2005-06, consumption in India rose to become cxv kg/capita whereas ours rose to 117 kg/capita. A affinity of few countries in 2005: Bangladesh 50 kg/capita Pakistan 117 kg/capita India 115 kg/capita USA 375 kg/capita Iran 470 kg/capita Malaysia 530 kg/capita EU 560 kg/capita China 625 kg/capita\r\nUAE 1095 kg/capita Challenges to Cement Industry The cost and exports may be affecte d due to weakness of the US dollar causing coal, electricity charges and freight prices, comprising 65 to 70 percent of the cost. The PSDP allocation for 2009 has been cut by Rs 75 billion and feared further cuts would curtail cement demand. major capacities of countries like India and Iran are expected to come online by FY10 and onwards which are in all likelihood to turn these countries from dependent importers to potential exporters.\r\nMoreover, this current rising dash is expected to be short-lived due to higher interest rates and inflationary concerns are likely to make it disadvantageous for investors to enter the construction industry. In addition to this, to control real estate prices the politics is considering imposing a tax on it. Major General Rehmat Khan, Chairman of All Pakistan Cement Manufacturers Association (APCMA), told Business Recorder, â€Å"cement industry is getting Rs 24 per ton as day dutydrawback for export of cement which needs to be revised.\r\nIn view of today’s calculation for duty drawback, which works out to Rs 130 per ton, he proposed that duty drawback be increased to Rs 130 per ton ,instead of Rs 24 per ton. ” Referring to taxation on cement, he said that cement dispatches are overt to payment of federal itch duty @ Rs 900 per ton, general sales tax @ 16 percent, special excise duty @ 1 percent, marking fee @ 0. 1 percent of ex-factory price, besides provincial duties and taxes. These taxes come to around Rs 96 per bag which is the highest in the world. Cement, it appears, is being set as a luxury item for the place of taxes and duties.\r\nHe proposed that the government should reduce excise duty by Rs 450 per ton in the forthcoming cipher while the remaining half should be eliminated only along with the special excise duty. Besides this, sales tax should not be charged on excise duty paid value. He also proposed withdrawal of customs duty on pamper deoxycytidine monophosphate and remove it from n egative list for import from India because cement industry imports Coal and Pet Coke as fuel for production and customs duty on imported coal is zero while on Pet Coke it is charged @ 5 percent. (c) ECONOMIC PAKISTAN\r\n'