Displaying items by tag: Maple Leaf

Pakistan: Maple Leaf Cement plans to expand the waste heat recovery (WHR) unit to 25MW at its integrated Iskanderabad plant. The project is scheduled for completion in September 2021. It has a projected budget of around US$11m.

As ever, there have been plenty of news stories from Pakistan recently covering the on-going fallout of the water shortage at the Katas Raj Temples in Chakwal, Punjab and an update on new production line at Maple Leaf Cement’s Iskanderabad plant. The two stories present two sides to the furious pace of the local industry and the potential price this growth might entail.

Graph 1: Cement despatches in Pakistan, 2012 - 2017. Source: All Pakistan Cement Manufacturers Association.

Graph 1 above sets the scene with an industry that has seen total despatches grow by nearly 30% to 42.8Mt in 2017 from 33.1Mt in 2012. About four-fifths of this is based in the north of the county. The big sub-story alongside this is that exports have fallen by half to 4.2Mt in 2017 from a high of 8.3Mt in 2013. The cause of this appears to be a decline in the Afghan market and a similar drop in waterborne clinker exports. Given the higher proportion of exports to the southern market this change has likely hit the industry in south harder despite overall depatches there rising. So far in 2018 similar trends are holding, except for exports, where the clinker export market has rallied significantly in the south.

The background to all this growth domestically is Chinese investment in the form of the China-Pakistan Economic Corridor (CPEC). CPEC-related project include integrated road infrastructure, the modernisation of railways and the development of the city of Gwadar and its related infrastructure. In addition the local Public Sector Development Programme (PSDP) is also having an effect and demographic pressures, such as a housing shortage, are also expected to support the construction market.

Data from the All Pakistan Cement Manufacturers Association (APCMA) placed cement production capacity at 54Mt/yr in September 2018 compared to 66Mt/yr in the Global Cement Directory 2018, which includes new capacity being built. This compares to around 10Mt/yr in the 1995 local financial year to an estimated 73Mt/yr by the State Bank of Pakistan in its third quarter report for 2017 - 2018. This rapid growth can be seen in recent stories such as the Iskanderabad plant expansion, Flying Cement’s mill order from Loesche, Kohat Cement’s mill order also from Loesche, a new solar plant at Fauji Cement at its Attock plant and the commissioning of DG Khan’s new plant at Hub. These stories are all from the last three months! The State Bank of Pakistan estimated that 11 producers hare now investing US$2.12bn on capacity expansions to add over 23Mt/yr by the end of the 2021 financial year.

One potential price for all of this growth is currently being illustrated in the ongoing legal wrangles about the use of water by cement plants near the Katas Raj Temples. What started as an investigation into why water levels were dropping at a pond at a Hindu heritage site seems to have transformed into a full scale inquiry into alleged corruption by local government around the setting up of cement plants. A report by the Punjab Anti-Corruption Establishment Lahore to the Supreme Court has found irregularities committed by government departments in connection to the setting up of cement plants by DG Khan and Bestway Cement in Chakwal. It seems unlikely at this stage that this inquiry will cause too much trouble for the local cement industry but it will certainly make it more complicated and potentially more expensive to st up new plants in the future.

Read Global Cement’s plant report from the DG Khan’s Khairpur cement plant in Chakwal

Pakistan: Maple Leaf Cement has appointed Tariq Saeed Saigol as the chairman of the company from 1 January 2014 for a three year term.

Saigol studied Law at University Law College, Lahore. He started his career in 1968 at Kohinoor's Chemical Complex at Kala Shah Kaku and became the chief executive of Kohinoor Textile Mills, Rawalpindi in 1976. Since 1984, he has been chairman of Kohinoor Maple Leaf Group, which has interests in textiles, energy and cement production.

He has also been chairman of the All Pakistan Textile Mills Association in 1992 - 1994, president of the Lahore Chamber of Commerce and Industry for 1995 - 1997 and chairman of the All Pakistan Cement Manufacturers Association from 2003 - 2006.

At the beginning of September 2013 Lucky Cement reportedly resigned from the All Pakistan Cement Manufacturers Association. The implications of this departure raise interesting implications for Pakistan's cement industry and its export markets.

Lucky Cement reacted to a growing row over energy prices for cement producers in Pakistan. The government increased electricity taxes for industrial consumers by 55% but only increased gas prices by 17.5%. This has created an uneven rise in the cost of production between those smaller cement producers powered off the national electricity grid and those larger cement producers using captive power plants. Suddenly smaller cement producers have found it much more expensive to make cement than their larger competitors.

Although Pakistan's cement industry contains over 20 producers, it is dominated by four major players - Lucky Cement, Bestway Cement, DG Khan and Maple Leaf – who hold nearly half of the country's cement production capacity of around 45Mt/yr. According to local media covering the spat, Lucky Cement uses 100% captive power generation, DG Khan Cement uses 40% and Maple Leaf Cement uses 45%.

In 2009 the Competition Commission of Pakistan issued fines to 20 cement producers found guilty of acting as a cartel and co-ordinating rises in cement prices. Following the action cement prices fell by 30%. Since then prices have steadily risen again with the industry publicly denying the existence of a cartel as recently as April 2013.

Regardless of whether any collusion exists today, with new cement production capacity announced this week by DG Khan, the incentives for Pakistan's larger cement producers are growing to keep their prices low with the benefit of seizing greater market share. Meanwhile the smaller cement producers could be squeezed on both energy input costs and price.

In Pakistan, if the larger cement producers act on the new market opportunities, industry consolidation seems possible. Internationally, if the big cement producers in Pakistan concentrate more on the domestic market then this presents opportunities elsewhere. For example, markets in East and South Africa receive significant cement imports from Pakistan. If the volumes of these imports decrease then local African producers and rival exporters will benefit.

Changes in Pakistan's cement industry carry implications both at home and abroad in its export markets. Who exactly these changes will be 'lucky' for remains to be seen.