cement industry.ppt

8/14/2019 Cement Industry.ppt

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29 cement production units.

19 under production units.

17 companies are registered in the Karachi Stock

Exchange. Production Capacity was 17.55 million tons in 2004.

Production Capacity increased to 36.84 million tons byMay 2007.

The demand for cement has increased from 14 milliontons in 2004 to 22 million tons by the end of 2007.

Pakistan has a major surplus which can be exported.


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Cement sector has potential to export cement of worth$1 Billion per annum.

Export markets are Saudi Arabia, Central Asian States

and Middle Eastern countries. Pakistan is rich in limestone, gypsum, and clay which

constitute the basic raw material for cement.

In spite of having such a huge reserve of raw material

Pakistan had to import cement for a long period oftime which reached to a level of 1.3 million tons in1981-82.


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The major constraint was the lack of local engineeringcapabilities.

Initial investment required was Rs 500 million of

foreign exchange to import machinery and 4 -5 yearsof establishing time.

The cement industry faced a recession period from1990 to 2002, with an average growth rate of 2.96%.

For the period from 2003 to 2007, Pakistan hadregistered an average growth rate of 20%.


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At the time of independence only four units wereoperating in Pakistan with a capacity of 0.471 milliontons and total production of 0.3 million tons.

From 1948-58, production increased to 0.66 million

with a demand of 1 million tons. During the decade of development (1958-68) the no. of

units increased from 6 to 9.

There was no growth in the period from 1971-77 and is

known as the grey era of cement production. During Zias regime after denationalization of cement

industry, the no. of units increased from 9 to 24.


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Ordinary Portland Cement (OPC).

Sulphate Resisting Cement (SRC).

Blast Furnace Slag Cement (BFSC).

White Cement.


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Wet Process: Huge amounts of water were requiredand energy consumption was immense. This processhas become obsolete and therefore companies haveswitched over to Dry and Semi-Dry processes.

Semi Dry Process: This process has also beenabolished because of high energy/fuel requirements.

Dry Process: Energy requirements are low, around 40%less than the wet process. The raw material is

preheated and therefore needs less energy. The kiln isshorter and needs less space. Plants established in the80s and 90s used this process, older plants have alsoconverted to dry process.


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Quarrying and Crushing

Blending and storage

Raw Milling and Homogenization

Burning

Loading and Dispatching

Cement dispatch


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Limestone

Alumina

Iron

Clay Gypsum

Slag/ Fire Clay

Shale


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Direct and Indirect taxes: Rs 23.50 Billion.

Value of Fixed Assets Deployed: Rs 85.21 Billion

Loans from Financial Institutions: Rs 79.53 Billion

Shareholders Equity: Rs 80 Billion Employment (Direct and Indirect): 150,000 (Approx.)

Contribution to GDP: 8.75%


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Number of units of Grey Cement

North Zone: 19

South Zone: 10

Total: 29


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Industry provides very few barriers to entry.

Positive demand and profitability

Two capacity addition cycles in 1990s.

Current capacity additions is largest: 20 mill ton to 44mill tons.

Even though barrier to entry is low but huge amountof investment makes it a difficult task.


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High demand in Middle East and African countrieshas significantly effected the cement industry.

APCMA says that the cement exports have increasedby 139 % by touching 5 million tons.

Pakistan cement exports increased in UAE after theyremoved the 5% import duty to enhance constructionin DUBAI.

The regional prices are benefitting Pakistan as they are

selling at price premium. Initial prices FOB were $65 per ton, Currently they

have increased to $75 per ton.


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Taxes: Excise duty: Rs. 750 per ton, Sales tax: 15%

Import: Cement imports: Nil, 25% duty.

Investment: New Chinese project costs Rs 6 Billion.

Capacity utilization: Increased to 88%, which ishighest among all industries in Pakistan.

Demand: Demand for cement has increased to 20million ton in 2006-07 from 14 million ton in 2005-06

Concessions to Local manufacturers: 0% duty onimport of raw material not manufactured locally.


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COSTS RS./TON RS./KG

Variable Cost 1,910.7 95.53

Fixed Cost 938.15 46.91

Total Production Cost 2,848.72 142.44

Excise Duty 750.00 37.50GST @ 15% 540.00 27.00

Freight and unloading 600.00 300.00

Margin of Distributor,whole seller, Retailer

300.00 15.00

Manufacturers profit@10% on equity

500.00 25.00

Market Price 5,538.72 276.94


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SWOT Analysis


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Availability of Cheap Raw Material

Availability of Cheap Labor

Availability of Cheap Energy source

Higher quality Cement Access to worldwide Cement market due to WTO

Easy Access to local markets


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Unavailability of skilled labor

Higher cost of production (utilities)

Higher GST as compared to other countries

Inadequate supply of coal Import of capital machinery for production

Unavailability of basic infrastructure outside Karachi


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Increasing prices of international coal. Shortage of plastic bags creating constraints for

exports.

Non-attentive behavior of Government.

Increasing cost of debt.

Import of lower quality cement.

Increasing price of real estate.

Unlawful stocking of cement in private warehouses. Expansion of production worldwide.

Frequently altering prices.


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Needs subsidies to enhance production to gain more ofthe market share

Government should provide industry cheaper energysources.

Keep coal prices in check.

White cement is in great demand in Middle East andEurope, needs to increase production.

Loans should be provided at cheaper rates. Plants need to be opened in areas of NWFP and

Baluchistan.


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The taxation is very high and needs to be reduced.

Need for more plastic bags for exports.

Stop illegal stocking of cement in private ware houses.

Stop and have quality controls to avoid import of substandard cement.

cement industry.ppt

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