Displaying items by tag: Pakistan

Pakistan's Lucky Cement received the 'all clear' for its cement imports from the South African regulators last week. The situation exposes the increasingly competitive market in the country after the South African Competition Commission cartel investigations in 2011.

Sales of Lucky Cement were originally shut down in 2011 due to accusations made by its competitors, including Pretoria Portland Cement (PPP) and Natal Portland Cement (NPC). They complained that Lucky was not complying with South African standards. South Africa's National Regulator for Compulsory Specifications (NRCS) then ran its independent investigation and released its results last week.

The regulator's full 28-day test found no evidence that Lucky Cement imports were non-compliant with regards to their quality. A minor infringement concerning underweight bags was found and fixed. However, about a week beforehand, Lafarge South Africa's CEO said that his company was considering approaching another trade body with concerns about 'low-quality cheap cement' imported from Pakistan.

More serious criticism came from the Cement and Concrete Institute when the NRCS admitted that it didn't know how much cement had been imported into South Africa so far in 2012. The NRCS is supposed to inspect and approve the testing bodies each producer and importer uses for every 500t of cement.

Lucky Cement has been a regular importer of cement to South Africa since 2009. It exports around 1.65Mt/yr to over 22 countries in South East Asia, the Middle East and Africa. CCI figures reckon that 140,000t of cement was imported to South Africa in the first quarter of 2012, mostly by Lucky Cement. According to the Global Cement Directory 2012 South Africa's capacity is around 11Mt/yr.

Four domestic producers – Lafarge, PPC, AfriSam and NPC – were accused of cartel activity by the South African Competition Commission, in a case that has been running since 2008. PPC confirmed the existence of the cartel, whilst Lafarge and AfriSam were fined US$19.6m and US$16m respectively.

By letting Lucky Cement resume the sale of its cement in South Africa, the NRCS has arguably done more than the Competition Commission to prevent cartel activity. With reports surfacing that other producers in Pakistan and India are considering exports to South Africa, domestic producers are going to have to become more inventive and more competitive.

Pakistan: Flying Cement has made changes to its board of directors, effective 6 August 2012. The new board consists of Mr Agha Hamayun Khan (Chief Executive), Mr Kamran Khan (Director and Chairman) and Mr Momin Qamar, Mr Yousaf Kamran Khan, Mr Qasim Khan, Mrs Shaista Imran, Mrs Samina Kamran and Mrs Misbah Momin as directors.

Agha Hamayun Khan replaced Kamran Khan with effect from 23 July 2012.

India: Mangalam Cement Limited has said that Mr R C Gupta, Company Secretary, Compliance Officer and Chief Financial Officer of the company resigned with effect from 8 August 2012.

Pakistan: The Environment Protection Department (EPD) issued notices to eight cement factories across the Punjab region during the week ending 3 August 2012 for failing to install devices to mitigate dust pollution levels.

The notices were served under Section 12 and Section 16 of the Punjab Environment Protection Act 2012 after a month-long survey. This was initiated after three cement factories in Chakwal, DG Khan Cements, Bestway Cements and Pakistan Cements, were found not to be using electrostatic precipitators (EP), air bags and other devices, despite having installed power generators to keep them operational.

Dandoot Cement Factory in Jhelum, Gharibwal Cements in Chakwal, Maple Leaf Cements in Mianwali and Pioneer in Khushaab have also been issued notices for not installing EPs. Fauji Cements in Attock has been issued a notice for mishandling raw materials. Bestway Cement was also given a notice for drawing too much water from communal wells. A case involving Flying Cements was forwarded to the Environment Tribunal after the factory management did not respond to several notices issued for not taking any measures to mitigate its dust emissions.

EPD spokesman Naseemur Rahman Shah said that the only way these factories could mitigate dust emissions was to install their own power plants so that EPs were not reliant on external power sources. EPs can trip out when external power provisions fail, even for a short while, and can take up to 20 minutes to restart operation.

South Africa/Pakistan: Pakistan's Trade Commission in South Africa has defended products made by a Pakistani cement company, Lucky Cement, saying that they meet all quality standards in South Africa. The move follows accusations from senior figures within Lafarge's South African unit. The Commission also pointed out that the products were cheaper than established South African-manufactured products.

Lafarge had earlier said that it was considering approaching the International Trade Administration Commission of South Africa to protect the local market from what it deemed to be low-quality, cheap cement from Pakistan.

Pakistan: The All Pakistan Cement Manufacturers Association (APCMA) has revealed that the Pakistan cement sector remained under financial pressure during the fiscal year 2011-2012, which ended on 30 June 2012. This was attributed to increases in input costs in electricity, diesel, paper sack and gypsum and a devaluation of the Pakistani Rupee. However, for the same period the industry's local cement despatches met the highest levels ever recorded in the country.

Revealing the performance of the cement sector in the fiscal year 2011-2012, a spokesman for APCMA said that local cement despatches were 23.9Mt, an increase of 8.84% year-on-year. However exports remained under pressure throughout the year and declined by 9.12% to 8.57Mt. 2011-2012 was the third consecutive fiscal year when exports declined.

In 2011-2012 the cement sector increased its capacity by 3Mt. Total production capacity increased by 7.23% to 44.2Mt from 42.2Mt in 2010-2011. Capacity utilisation remained under pressure due to sluggish export demand, a sluggish construction sector, lack of investment in the housing sector and the government's 'inability' to initiate mega-projects.

Exports to India were only 0.61Mt in 2011-2012, a figure well below the expectations of the cement sector. However, exports to Afghanistan remained stable at 4.72Mt in 2011-2012. Exports to other destinations by sea declined to 3.25Mt, a drop of 17%.

Pakistan: Lucky Cement has started supplying 20MW/hr of electricity to Hyderabad Electricity Supply Company Limited (Hesco), according to a company announcement. The company said that it was aiming to start selling the same amount of electricity to Peshawar Electricity Supply Company Limited (Pesco) by the middle of July 2012. Speaking on 2 July 2012, a company spokesman said that the talks were underway on the sale and purchase agreement with Pesco.

Since 2010 Lucky Cement has operated 22MW waste-heat recovery units on two cement plants in Karachi and Pezu. The sale of surplus power has enhanced the company's balance sheet, as it struggles against continued low demand in the Pakistan market.

Pakistan: Cement manufacturers in Pakistan are regretting their decision to increase capacity as consumption has remained stagnant over the past four years, according to the All Pakistan Cement Manufacturers Association (APCMA). Exports are also declining, forcing the sector to operate at 69% of its installed capacity.

An APCMA spokesman explained how capacities were increased when the economy was booming and that most of the plant capacities were increased in the northern part of the country. For these regions Afghanistan was the only export market but its potential was limited. Exports to India were limited at that time and today as well due to many non-tariff barriers erected by India.

The spokesman regretted that the growth during the past four years had been much below expectations and that the government also failed to provide funds for, what he called, 'essential' infrastructure. The fierce competition between the mills sitting on huge capacities kept the rates of the commodity much below the average inflation in the country, he added. Rates of inputs of the industry increased in line with the inflation and rupee devaluation while the cement prices increased by just 6% from the average cement rates in 2006.

The APCMA spokesman added that exports, which provided some relief to the industry in the past few years, have declined at a rapid pace during the first eight months of the current fiscal year (July 2011 to February 2012). During this period the decline in exports was 5.57% to 5.62Mt from 5.95Mt during the corresponding period in 2010-2011. He said that exports to India, mostly via train, had increased by 39.5%.

Pakistan: Many Pakistani cement manufacturers have posted robust earnings during the first half of the 2012 financial year, which ended on 31 December 2011. Across the six major producers, representing 68% of the market, the overall profitability of the sector grew by a factor of 2.2 over the same period of 2010. Overall net sales of the sector grew by 32% to US$418m.

Separately most Pakistani cement producers posted profits for the six month period. DG Khan and Lucky Cement, which between them contribute around 25-28% of total cement sales, posted robust earnings per share growth. On the other hand, Fauji and Thatta Cement, despite better overall margins, posted losses. Fauji Cement posted losses due to lower utilisation of its new 2.1Mt/yr plant due to power outages and lower demand, while Thatta cement remained in the red due to extremely low sales, which were approximately 20% of those expected.

Pakistan: The State Bank of Pakistan (SBP) has stated that "cement prices remain inexplicably high," in its State of Pakistan's Economy report published on 28 January 2012.

Expressing concerns over an increase of 17.3% in cement prices from July – November 2011 compared to the same period in the previous financial year, SBP has highlighted that this increase arose despite "a reduction on cement taxes and only a 10.7% increase in coal prices during the period."

The high prices of building materials and the strain of sales tax are expected to dent the growth of the manufacturing sector during the current financial year.

The large scale manufacturing (LSM) sector has registered growth of 2.1% in the first quarter, compared to a 2.9% decline over the same period last year. Lower duties on cement, beverages, automobiles and air conditioners have provided fiscal support to this sector according to SBP.

Yet SBP has warned that growth in the LSM sector may not be sustainable in coming months as the low base effect brought on by floods in 2011 withers away in subsequent periods.

Afghanistan/Pakistan: Exporters from Pakistan have raised cement prices in the Afghan market by 25%.

Cement exports to Afghanistan currently represent 50% of the total exports from Pakistan where major quantities are shipped by the companies close to the north-west border between the neighbouring countries. According to Shagufta Irshad, a senior analyst of KASB Securities, Pakistan exported 4.7Mt to Afghanistan during the year 2010-2011 and 2.5Mt during the first half of 2011-2012. This increase will have a positive impact on the earnings of exporting companies in the current financial year, as well as to the country as a whole.

Currently Pakistani cement dominates in the central and north regions of Afghanistan where major reconstruction activities are underway. The Pakistani companies with the most exposure to the Afghan market include Lucky Cement, Bestway, Cherat, Lafarge Cement, Fauji Cement and DG Khan Cement. DG Khan Cement has a higher exposure to the Afghan market than Lucky Cement because both its plants are located in the northern region.

Pakistan's exports to Afghanistan currently contribute 30% of DG Khan Cement's total exports, compared to 20-25% for Lucky Cement. Shagufta noted that this increase will bring a rise of 16% and 3% in the earnings for DG Khan Cement and Lucky Cement respectively in the year 2011-2012.