History

Cement industry is one of the few industries that existed in Pakistan before the partition
of the sub-continent. The major reason for the existence of this industry is the availability of the
raw materials. Pakistan has inexhaustible reserves of limestone and clay, which can support the
industry for another 50-60 years. The annual production of the cement at the time of the creation
of Pakistan was only 300000 tones per year. By 1954 the production increased to 660000 tonnes
per annum against a demand of 1000000 tonnes per annum. At this time PIDC took initiative and
established two cement factories Zealpak (240,000 tonnes) and Maple Leaf (100,000 tonnes)
having a capacity of 340000 tones, thereby increasing the production to 1000000 tonnes per
annum. Since then besides expansion of the existing plants, new plants have also established.
Besides producing OPC, the Pakistani cement industry also started producing SRC, Slag cement
and white cement.

In 1921 the first cement plant was established at WAH. At the time of independence in
1947 there were four cement factories with an installed capacity of 470,000 tonnes per annum.
These units were located at Karachi, Rohri, Dandot and WAH. In 1956 PIDC established two
plants at Daudkel and Hyderabad and subsequently more plants were established in the private
sector.

ERAS IN THE HISTORY OF CEMENT INDUSTRY

Following are the Eras in the history of cement industry.

AYUB KHAN’S ERA (1958-1965):

 In Ayub’s era Pakistan gain a relatively sizeable manufacturing base. At his time
manufacturing growth was 8.51%.
 At his time the economy started to grow.
 At his time the numbers of cement industries increased from 6 to 9.

BHUTTO’S ERA (1971-1977):

 At his time government took the control on all the industries including cement industry it
means that all industries were nationalized.
 At his time the demand of growth for cement industry was about 7% per annum.
  New units were not set up during his time.

ZIA-UL-HAQ’S ERA (1977-1987):

 At his time denationalization (Private industries) boosted the investment in cement sector.
 At his time government helped the private firms to establish units in the industry.

NAWAZ SHARIF’S ERA (2013-2018):

 In 1990 cement industry was privatized. Privatization helped to setting up new units.
 At his time five new projects was came on with the capacity of 5 million tons.
 The five new projects were:
1) Pioneer (Punjab) 1994.
2) Lucky (KPK) 1996.
3) Askari (KPK) 1997.
4) Fauji (Punjab) 1997.
5) Best Way (KPK) 1998.

MUSHARAF’S ERA (1999-2008):

 At his time the government impose taxes on sales of cement industry.

 At his time government give permission to KPK to establish 4 units of cement industry.

YOUSUF RAZA GILLANI’S ERA (2008-20013):

 Pakistan made a great growth of cement industry of about 20% in his era. This was the
better era for cement industry.

NAWAZ SHARIF’S ERA (2013-2018):

 At his era and time cement industry got huge growth in terms of capacity and sales. The
capacity was 44.64 million metric tons at the end of the fiscal year 2012 to 2013. And
59.36 million metric tons at the end of the fiscal year 2017 to 2018.

IMRAN KHAN’S ERA (SINCE 2018):

 At his time the capacity of cement industry remained the same because the starting time
was slow and new plants were not established.
  During the start of eight months of fiscal year the total sales were grown up to 33.13
million tons. And 32.253 on the last year.

NATIONALIZATION

The industry was nationalized in 1972 and the State Cement Corporation of Pakistan
(SCCP) was established following the Economic Reforms Order, 1972. As a result of
nationalization, a total of 10 cement units with an installed capacity of 2.8 million tonnes per
annum were transferred to the SCCP. Effective price control was also vested with the SCCP and
for a long time the industry operated under a regime of strict regulation and price control. While
the cement industry was working under the state control, the SCCP established five new units
with an installed capacity of 1.8 million tonnes per annum. For the next fifteen years no new
cement plant was established under the private sector, which resulted in acute shortage of cement
in late 70s and early 80s. This gap was filled by the import of cement. Severe shortage of cement
and price deregulation prompted the private sector to establish more plants. Seven units were
established in the private sector before commencement of the process of privatization in 1991.

PRIVATIZATION/ DEREGULATION

During the regime of Nawaz Sharif the industry went through major transformation. As a
part of its privatization policy, the Government of Pakistan, has privatized 8 cement plants since
1992. Due to privatization the SCCP lost its control over the prices of the cement and as a result
new cement plants were established under private sector. The units working under the SCCP
control are old and inefficient using “wet process” whereas the units established in the private
sector are new, efficient and use “dry process”. At present there are more than 28 cement plants
in Pakistan with installed capacity of over 19.5 million tonnes per annum. The present demand
for cement in Pakistan is around 9.5 million tonnes per annum.

GEOPGRAPHY OF CEMENT INDUSTRY:

Majority of the cement companies in the country are situated in the locality of mountainous
areas. These areas are extremely rich in the inputs necessary for the cement production such as
clay, iron, gypsum and other minerals. (Manarvi, & Gardezi, 2014).

The cement industry of Pakistan is distributed into two wide regions on the base of their
geographical locality which consist of Northern zone and Southern Zone. The Northern zone
covers over 80% of the total cement share of the country however rest of the cement is produced
in the southern zone. (Manarvi, & Gardezi, 2014).

1. Northern region: 80% share in total cement production. Capacity of 38 million tons.
2. Southern region: 20% share in total cement production. Capacity of 7 million tons.

The main purpose for the survival of this industry in Pakistan is the accessibility of raw
materials. Pakistan has limitless reserves of limestone and clay, which can support the industry
for another 50-60 years.

Cement industry of Pakistan is satisfying the local demand of cement and also exporting cement
to the neighborhood countries like Russia, Iraq, Sri Lanka, India, Afghanistan and United Arab
Emirates. Currently, Pakistan is also exporting cement to some African countries as well.

Industrial localities are complex in nature. These are inclined by convenience of raw material,
labor, capital, power and market, etc. It is hardly possible to discover all these factors available at
one place. Subsequently, manufacturing activity inclines to locate at the rightest place where all
the factors of industrial locality are either accessible or can be arranged at lower cost.
 PORTER FIVE FORCES ANALYSIS

Intensity of rivalry among competitors

The competitive rivalry in the cement industry in Pakistan is can be termed as medium as
no single cement company has dominant control over the market with the highest share of Lucky
Cement of 17%.There are 21 cement manufacturing companies competing with each other in
Pakistan as per the KSE list of cement sector. The HHI index which measures the
competitiveness of an industry is 0.10 of cement industry in Pakistan which proves intense
rivalry as market concentration is low. On the export side, Pakistani cement companies are
competing with Iranian and Chinese cement manufacturers and Afghanistan with loads of cheap
Iranian cement along with anti-dumping duties being imposed on Pakistani cement in South
Africa the competition is being more intense in terms of exports.

Threat of Substitutes

The substitutes of cement generally includes the use of Fly Ash, slag and concrete but in
Pakistan the cement firms actually use them as raw materials and people are hesitant to use these
substitutes because of lack of quality and conditions for their effectiveness. Wood and steel can
be used as a substitute of cement but in Pakistan wood is not in high demand for the construction
of houses and whenever steel is used it’s actually used along with cement. There is no perfect
substitute which exists for cement in Pakistan and its usage is predominantly high which means
the threat of substitutes is very low in cement industry of Pakistan.

Threats of new entrants:

The cement industry is growing in Pakistan as the industry saw growth of 11.14% in mid
– 2018 which encourages opportunity for new companies to enter in this sector.

The capital requirements for setting up a cement manufacturing plant is really high with a
minimum of 10 billion rupees which is a constraint in term of investmemt.
 The cement industry of Pakistan is subject to high tax specially in the form of excise duty
which was raised by Rs.250/ton in 2018-2019.