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Update on Pakistan, April 2024
24 April 2024Changes are underway in South Asia’s second largest cement sector, with two legal developments that affect the industry set in motion in the past week. At a national level, the Competition Commission of Pakistan recommended that the government require cement producers to include production and expiry dates on the labels of bagged cement. Meanwhile, in Pakistan’s largest province, Punjab, a new law tightened procedures around the establishment and expansion of cement plants. At the same time, the country’s cement producers began to publish their financial results for the first nine months of the 2024 financial year (FY2024).
During the nine-month period up to 31 March 2024, the Pakistani cement industry sold 34.5Mt of cement, up by 3% year-on-year. Producers have responded to the growth with capacity expansions, including the launch of the new 1.3Mt/yr Line 3 of Attock Cement’s Hub cement plant in Balochistan on 17 April 2023. China-based contractor Hefei Cement Research & Design executed the project, including installation of a Loesche LM 56.3+3 CS vertical roller mill, giving the Hub plant a new, expanded capacity of 3Mt/yr.
Pressure has eased on the operating costs of Pakistani cement production, as inflation slowed and the country received a new government in March 2024, following political unrest in 2022 and 2023. Coal prices also settled back to 2019 levels, after prolonged agitation. Pakistan Today News reported the value of future coal supply contracts as US$93/t for June 2024, down by 2% over six months from US$95/t for January 2024.
Nonetheless, cost optimisation remained a ‘strong focus’ in the growth strategy of Fauji Cement, which switched to using local and Afghan coal at its plants during the past nine months. Its reliance on captive power rose to 60% of consumption, thanks to its commissioning of new waste heat recovery and solar power capacity. During the first nine months of FY2024, the company’s year-on-year sales growth of 14% narrowly offset cost growth of 13%, leaving it with net profit growth of 1%.
Looking more closely, the latest sales data from the All Pakistan Cement Manufacturers Association (APCMA) shows a stark divergence within cement producers’ markets. While exports recorded 68% year-on-year growth to 5.1Mt, domestic sales fell, by 4% to 29.4Mt. The association further breaks down Pakistani cement sales data into South Pakistan (Balochistan and Sindh) and North Pakistan (all other regions). Domestic sales dropped most sharply in South Pakistan, by 6% to 5.16Mt. In the North, they dropped by 3% to 24.2Mt. Part of the reason was a high base of comparison, following flooding-related reconstruction work nationally during the 2023 financial year. Meanwhile, the government finished rolling out track-and-trace on all cement despatches during the opening months of the current financial year, and commenced the implementation of axle load requirements for cement trucks. APCMA flagged both policies as potentially disruptive to its members’ domestic deliveries, amid a strong infrastructure project pipeline.
Pakistani producers suffer from overcapacity, but have established themselves as an important force in the global export market. They continue to locate new markets, including the UK in January 2024. Lucky Cement was among leading exporters overall, with a large share of its orders originating from Africa.
On 17 April 2024, the government of Punjab province set up a committee to assess new proposed cement projects, with the ultimate goal of conserving water. Falling water tables are considered a significant economic threat in agricultural Punjab. Besides completing an inspection by the new committee, proposed projects must also secure clearance from six different provincial government departments and the local government. While acknowledging the necessity of the cement industry, the government insisted that it will take legal action against any cement plant that exceeds water allowances.
Pakistan’s cement plants have grown in anticipation of a local market boom. Without this strong core of sales, underutilisation will remain troublesome, especially in North Pakistan where exposure is highest. At the same time, APCMA has given expression to the perceived lack of support affecting production and distribution. For an industry with expansionist aims, new restrictions on its growth and operations can feel like an existential menace.
Vietnamese cement sales to rise in 2024
02 February 2024Vietnam: Financial management company SSI Securities Corporation says that it expects Vietnam’s cement consumption to ‘bottom out’ in the first quarter of 2024, before recovering ‘gradually’ throughout the rest of the year. Việt Nam News has reported that the anticipated recovery is the outcome of intensified investments in infrastructure by the Vietnamese government, beginning in late 2023. The cement sector also anticipates growing demand from export markets, including Australia, the US, Africa and South and Central America, as it lowers its reliance on exporting to China. Challenges persist in the form of protective measures or stricter standards in other markets, including the Philippines and Europe.
Transcargo International to build cement terminal at Arish port
01 December 2023Egypt: Abu Dhabi Ports Group subsidiary Transcargo International (TCI) is building a bulk cement terminal at Arish port in North Sinai Governorate. The company says that the facility will be equipped with six 10,000t cement silos. Four silos will store up to 40,000t of grey cement, while two will store up to 20,000t/yr of white cement. Cementir Holding subsidiary Sinai White Portland Cement has signed a cooperation agreement with TCI to use the Arish cement terminal. TCI says that the terminal will serve multiple markets worldwide and help Sinai White Portland Cement to raise its total export volumes, thereby also raising its competitiveness.
TCI’s CEO Mohamed El Ahwal said "This project aligns with our commitment to support Egyptian exports by providing specialised logistics solutions across several industries. Building and operating Egypt’s first bulk cement terminal, we anticipate cost savings for cement producers in Egypt, making prices more competitive globally and increasing global market penetration."
Vietnam raises 10-month exports to Australia
28 November 2023Vietnam/Australia: Vietnam exported 412,000t of cement to Australia during the first 10 months of 2023. Việt Nam News has reported that this is more than double the 10-month 2022 figure of 157,000t. The total value of the shipments also more than doubled year-on-year, to US$20.5m from US$8.37m.
Norway: Heidelberg Materials Northern Europe inaugurated its Slemmestad cement terminal in Asker on 17 November 2023. The terminal’s equipment includes 12,000t-capacity cement silos. It cost US$13.3m to build and has a loading rate of 390t/hr.
Planned railway to support Kazakh cement exports to Kyrgyzstan
21 November 2023Kazakhstan/Kyrgyzstan: The government of Kazakhstan’s Jambyl Region says that investors have come forward to support construction of a proposed railway between the region and Kyrgyzstan. Central Asia News has reported that a major cement plant construction project is underway in Jambyl Region. Regional governor Yerbol Karashukeyev said that Kyrgyzstan is undergoing a ‘building boom,’ including in the major market of Bishkek, 20km from the border with Jambyl Region.
Karashukeyev said “In view of the rapid development of the market in Kyrgyzstan and the production of large volumes of construction materials in Kazakhstan, it is worth developing cooperation.”
JSW Infrastructure to build US$495m port of Keni
17 November 2023India: JSW Group subsidiary JSW Infrastructure has won a contract to build a new deep-water port at Keni in Karnataka on a public-private partnership (PPP) basis. India Blooms News Service has reported that the port will support export terminals for local cement plants and limestone mines, alongside other industries.
Zimbabwe government allows licence-free import of up to 5t of cement
16 November 2023Zimbabwe: The government has enacted new rules according to which companies and individuals may import up to 100 50kg bags of bagged cement without an import licence. The Chronicle newspaper has reported that the measure aims to alleviate an on-going shortage. The government previously indicated that it would ease restrictions on cement imports for the first time since 2021 after prices doubled year-on-year on 7 November 2023.
Vietnam’s 10-month cement and clinker exports rise in 2023
31 October 2023Vietnam: The government recorded growth of 0.3% year-on-year in exports of cement and clinker from Vietnam during the first 10 months of 2023. They ended the period at a cumulative 26.2Mt, compared to 25.9Mt a year earlier. Việt Nam News has reported that the value of exports fell by 2.4%, to US$1.13bn.
EU: The EU launched the transitional phase of its carbon border adjustment mechanism (CBAM) on 1 October 2023. Parties that import cement - and five other commodities - into the EU must now show the embodied CO2 emissions of their products.
The transition comes ahead of the full implementation of the CBAM in January 2026. At this point, those importing cement into the region will have to pay for the embodied CO2 of their products in order for them to enter the EU Common Market. Producers within the EU already pay for a proportion of emissions under the auspices of the EU Emissions Trading Scheme (ETS).
The intention of the CBAM is to reduce the risk of 'carbon leakage' as the costs of making cement rise in the EU due to changes in the ETS. While cement producers, as heavy CO2 emitters, are currently shielded from the full cost of their emissions, the number of free allowances they receive is set to fall substantially by 2026. At the same time, the cost of emitting a tonne of CO2 under the ETS, currently Euro80-90/t on the open market, is widely expected to rise.