Pakistan is experiencing Asia`s fastest-growing urbanization and studies show that half of the population of Pakistan will be living in cities by 2030. So, whether it is any housing scheme or CPEC infrastructure, consumption of cement is going to increase and so does the industry's monetary contribution to the national exchequer.
Cement is
arguably the most important, and widely used, building material in the modern
age. It’s used in homes, in office
buildings, roads, bridges and infrastructure in general. The amount of cement
consumed in a country each year is an indicator of its pace of socio-economic
development and progress. Pakistan is the world’s
14th largest cement producer.
Nevertheless, its per capita cement consumption at 140kg is on the
lower side in its immediate region (with China & India around) and much
lower when measured against a global consumption average of 400kg. On a positive
note: it indicates that the industry has significant potential to see growth
with the development of the country.
The cement industry of Pakistan has come a long
way since 1947. Immediately after Partition, the annual production of cement in
the country was 300,000 tons per year and total installed capacity was 470,000
tons per annum. The first cement factory, established in 1921, in the region,
that is now Pakistan, was at Wah, Punjab.
By 1954, it became clear that demand for cement
was much greater than installed capacity. A million ton was required annually
but only about 660,000 tons were being supplied. To cater for the shortage, the
Pakistan Industrial Development Corporation (PIDC) took the initiative of
expanding production in the country.
Two cement factories were established at
Zealpak and Maple Leaf, with installed capacities of 240,000 and 100,000 tons
respectively. Today, the operational capacity of cement production in Pakistan
is estimated to be between 46- 49 million tons, with an expected expansion to
76 million tons by 2020.
The APCMA, the apex body of the cement
manufacturers of Pakistan, is helpful in terms of understanding Pakistan’s world
of cement. It was incorporated on 14th of September 1992 under section 32 of
the Companies Ordinance 1984.
Today, it plays an important role in coordinating activities of
various cement plants with respect to government policies and represents all
major policy-making bodies concerned with cement. It also maintains up-to-date
data about cement usage, demand, capacity, and finances.
Cement Industry’s contribution to the Economy
The cement industry contributes billions to Pakistan’s
economy. In 2016, it contributed approximately Rs. 20 billion to the national
exchequer alone, over Rs. 40 billion is added to country’s
GDP annually.
The Karachi Stock Exchange lists 21 companies in the cement sector
with the net worth of these companies around Rs. 25 billion. Some of the
companies operate multiple plants in various cities. As per APCMA, there are
currently 24 cement plants in Pakistan.
Structure of the Industry
These cement plants are distributed across the country; mostly
around the population centers. The Northern Zone consists of Upper Punjab, KP,
Azad Kashmir and areas of Balochistan close to KP and Punjab. The Southern
Zone, for the most part, is made up of Sindh i.e. the areas close to Karachi.
Demand for Cement
In Pakistan, residential and commercial property sectors and
infrastructure projects are the key drivers of cement demand. Consumption is
expected to increase in both areas.
Residential Demand
Pakistan is experiencing Asia’s
fastest-growing urbanization and with that comes the need for more housing. One
government study has shown an immediate need for housing units estimated at 9
million units.
These figures also reveal the uneven patterns of structural growth;
for instance, from 2006 to 2016, the industry grew at a rate of 7% to 10% in
the Northern zone whereas, in the South, it has grown at about 4%. The South is
also more dependent on exports than the North. There are over 12 plants in
Punjab, 5 in KP, 2 in Balochistan (for a total of 19 in the North Zone) and 5
in Sindh (Southern zone).
These plants are located in or near the major population centers in
Pakistan. According to the Pakistan Bureau of Statistics, 32% of the people in
Punjab, 47% in Sindh, (figures jump because of Pakistan’s
urban jungle: Karachi) 17% in KP and 24% in Balochistan live in urban areas. In
urban areas, the demand for cement comes mostly for new housing units.
Studies by the Planning Commission of Pakistan
show that by 2030, half of the population of Pakistan will be living in cities.
This means over 100 million urban citizens, and these citizens will need houses
to live in. Data from the Pakistan Bureau of Statistics show that there are
currently over 19 million housing units in the country.
38% are single bedroom houses, around 31% are
two-bedroom houses while the rest are three, four and five bedroom houses. 55%
are Pucca houses (i.e. houses that are designed to be permanent dwellings), 11%
are Semi-Pucca and 35% are Kacha houses (not permanent). Housing societies
usually have Pucca houses.
The average cement consumption for a 5 marla
Pucca house is over 540 bags, where each bag has a standard weight of 50
kilograms. New housing societies are sprouting up in and around all major
cities of Pakistan. About 50% of the demand for cement comes from these
schemes. There are over 5100 registered housing societies working across
Pakistan.
As indicated above, these tend to be
concentrated in and around major cities. 440 are in Karachi, 656 in Islamabad,
45 in Peshawar and 705 housing societies are in Lahore alone. But these figures
may be misleading; according to one government official: According to the 6th
population census in Pakistan conducted in 2017, Islamabad has grown by 149%
since 1998, with an annual growth rate of 5%.
There has been a 60% increase in Karachi’s
population and a 116% increase in the population of Lahore since the previous
census. Similar percentages of the increased population have been documented in
other major cities of Pakistan. These increases correlate with a need for an
increase in production capacity in the country.
Prime Minister Abbasi is exploring the
possibility of reviving the stalled Apna Ghar Housing scheme, a bold initiative
set up to build 500,000 housing units per years. The formation of a new public
limited company was discussed by the federal government in 2013, but the scheme
was not launched earlier. The initiative will provide affordable housing on
easy instalments to low-income groups.
Infrastructure demand
In Pakistan, the network of roads has grown steadily, despite
changing governments and political instability.
Portland Cement-one of the most Common Types of Cement used
for Building Houses
According to the ministry of finance, 90% of national passenger
traffic and 96% of freight movement in Pakistan occurs through roads. The
transport and communications sector contributes about 10% of the country’s
GDP.
As per the National Transport Research Center, the total length of
roads in Pakistan is over 264,000 kilometers. It is estimated that about 900
tons of cement are required to lay one kilometer of a simple two-lane road.
Impact of CPEC:
Probably no country has had faster industrial development and
growth in modern history than China. It is no surprise then, that, the largest
cement manufacturing industry today also exists in China.
In 2017, over 60% of the world’s
cement was produced and consumed in China (population: 1.3 billion) followed by
India (population: 1.2 billion) at 6% and then the USA (population: 330
million) at 2%. And the cement industry of China is 30 times larger than that
of the US.
In 2016, 2400 giga-tons of cement (Giga equals a thousand million)
were manufactured in China. After decades of double-digit growth, Beijing is
now reaching outwards and expanding its economic influence. The Belt and Road
Initiative (BRI) also referred to as OBOR (One Belt One Road) is a
multi-trillion-dollar mega-project that will connect China with Europe,
Eurasia, Africa and the Middle-East via road and sea-links.
China Pakistan Economic Corridor (CPEC) is its flagship project – and
the only one that is seeing physical progress so far. The economic corridor
comprises a network of infrastructure projects, energy projects industrial
parks and more. The cement industry of Pakistan is expected to get a boost from
this.
Pakistan’s cement
industry is currently running at 95 percent capacity that has encouraged the
domestic cement manufacturers to spend an estimated $2.25 billion on new
production capacity. “The
China-Pakistan Economic Corridor (CPEC), is expected to have the huge impact on
cement production levels, with a Joint Cooperation Committee having been
established to promote the construction of CPEC between 2013-30,”
according to Cement.
A network of roads is going to connect
different parts of Pakistan with each other and the port of Gwadar with
Xinjiang province in China. It is the biggest infrastructure project in
Pakistan’s entire history and will guarantee increased
demand of cement. According to the International Cement Review, “robust
construction activity has led to local cement producers increasing capacity at
a break-neck speed.”
Cement manufacturers are thus eyeing new
opportunities with CPEC. Pakistan’s Maple
Leaf Cement Factory told the Pakistan Stock Exchange that the company had
placed an order to Danish firm FLSmidth for the establishment of a new cement
production line with a daily capacity of 7300 tons.
Similarly, Bestway Cement, a subsidiary of
Bestway Group UK, the largest cement manufacturer in Pakistan, (with around 17%
of the market) informed the Pakistan Stock Exchange in March 2017 that it will
set up a brownfield cement plant with a capacity of 6000 clinker at its
Farooqia site in northern Pakistan.
The CEO of Bestway Cement said in an interview,
“CPEC will ensure that the economy will grow at
a faster pace generating employment and business opportunities for many
industries and the cement industry will be at the helm of it.”
