Pakistan's cement exports to Middle East and African countries are expected to increase manifold on its rising demands in the upcoming months and countries particularly Afghanistan and Iraq are very attractive markets for the ongoing construction projects.
A report prepared by Topline Securities said Afghanistan will be a permanent market due to lack of availability of limestone while the demand may rise to 15 million tonnes from current 2.5 million tonnes.
It said that in the last decade the demand for cement has increased by 235 percent to 33.2 million tonnes while, supply, due to expansions has increased to 44.8 million tonnes, i.e. excess supply of 11.6 million tonnes. The Pakistan cement sector may witness an expansion phase in 2014 due to pickup in local and regional demand, it said.
Currently, the combined installed capacity (35.9 million tonnes in North and 8.9 million tonnes in South) stands at 44.82 million while Fauji Cement's 2 million tonnes project is expected to come online this year, which will increase name plate capacity to 46.82 million tonnes. After this, Pakistan will be included in top 20 cement producers, the report said.
Pakistan has great cement export potential of 5 million tonnes to 27 countries. While bagged cement has export potential of 10 million tonnes.
Key challenges highlighted by the report includes higher indirect taxes (Rs 700 per tonne fixed excise duty, 1 percent special excise duty) which make Pakistan's cement less competitive against regional players like India and China.
With huge potential of exports, Pakistan cement industry requires the government to take effective measures to support export sales with reduction in port costs (port duties and dock labor cost), increase of rebate on exports, separate births at ports for export clinker and cement.
With fuel source changing from furnace oil to coal, the dynamics of the sector have changed. Large manufacturers apart from installing waste heat recovery project for cheaper electricity are also looking towards alternate fuel sources (bio mask and municipal waste), which is estimated to fulfill 25 percent of power needs of the respective companies.
With Pakistan targeting a gross GDP growth of around 6 percent in next 5 years, huge investment in construction, infrastructure and transportation would be required, it said. These infrastructure investments include development projects like dams, highways and trade corridors. Furthermore, with rising coal demand in the country the government should allocate investments for extraction of coal reserves from Thaland Balochistan.
