080124 Sector Cement BOI

8/7/2019 080124 Sector Cement BOI

1/20

BOARD OF INVESTMENTGOVERNMENT OF PAKISTAN

CEMENT SECTOR

CONTENTS

Sector Overview 1

Contribution to National Economy 2

Types of Cement Produced in Pakistan 3

Number of Units 4

North Zone Profile 5

South Zone Profile 6

Installed Capacity of North Zone 7

Installed Capacity of South Zone 8

Worlds Cement Production 9

Pakistans Cement Production 10

Pakistans Share in Worlds Production 10

Cement Production Capacity and Production 11

Major Exports of Cement Products 12

BOI


2/20

Sector Overview

There are 29 cement production units in the country. Upto May 2007,

the total installed cement production capacity is 36.841 million tones. By the end of

June 2011, the installed cement production capacity will touch to the level of 49.579

million tonnes.

Due to political instability and lack of allocation of funds for public sector

development program, cement industry of Pakistan was in the recession phase had

registered an average growth rate of 2.96% for the period from 1990 to 2002. For the

period from 2003 to 2007 cement industry of Pakistan had registered an average

growth rate of 20%. The boost in cement sector is because of the rising

construction activity in the country, reconstruction activity in Afghanistan and

increasing development expenditure by the government.

Presently, the cement industry of Pakistan is heavily burdened due to

levy of Federal Excise Duty @ Rs. 750 per ton and General Sales Tax @ 15% on

duty paid value. In addition to Federal Excise Duty and General Sales Tax, cement

industry is also paying the provincial levies (Royalty and Excise Duty) on acquiring

of raw material for production of cement i.e. lime stone and shall clay. Per ton cost

impact of these taxes in four provinces of Pakistan is as follows:

Punjab NWFP Sindh Baluchistan

Lime Stone 24 21 17 65

Shall/Clay 3 4 3 11


3/20

Contribution to National EconomyBy

Cement Sector

Direct and Indirect Taxes Rs. 23.50 Billion

Value of Fixed Assets Deployed Rs. 85.21 Billion

Loans from Financial Institutions Rs. 79.53 Billion

Shareholders Equity Rs. 80.00 Billion

Employment (Direct & Indirect) 150,000 (Approx.)


4/20

TYPES OF CEMENT PRODUCED IN PAKISTAN

1 Ordinary Portland Cement (OPC)

2 Sulphate Resisting Cement (SRC)

3 Blast Furnace Slag Cement (BFSC)

4 White Cement

PRODUCTION PROCESS

1 Dry Process (In Pakistan most of the industry employs dry process)

2 Semi-wet Process

3 Wet Process

RAW MATERIAL

Main constituents of cement include:

1 Lime

2 Alumina

3 Iron

4 Laterite

These constituents are obtained from following raw materials:

1 Lime stone

2 Clay

3 Overburden

4 Shale

5 Gypsum

6 Iron ore7 Bauxite

8 Slag / Fire Clay

Cement manufacturing consists of following four processing steps:


5/20

Number of Units (Grey Cement)

North Zone 19

South Zone 10

Total 29


6/20


7/20

12 Kohat 540,000 567,000 - 540,000 567,000 1 April,1983 Dry N.W.F.P

New Line - - 2,010,000 2,010,000 2,110,500 1 Jul-07 Dry N.W.F.P

540,000 567,000 2,010,000 2,550,000 2,677,500 5.40%

13 Lucky 628,571 660,000 91,429 720,000 756,000 1June,1996 Jul-05 Dry N.W.F.P

628,571 660,000 91,429 720,000 756,000 1June,1996 Jul-05 Dry N.W.F.P

New Line I - - 1,142,857 1,142,857 1,200,000 1 Sep-05 Dry N.W.F.P

New Line II - - 1,142,857 1,142,857 1,200,000 1 Sep-06 Dry N.W.F.P

1,257,143 1,320,000 2,468,571 3,725,714 3,912,000 7.89%

14 Maple Leaf

Old Line 120,000 126,000 - 120,000 126,000 1 1956 Wet Punjab

" 171,000 179,550 - - - 0 1960 Wet Punjab

" 180,000 189,000 - 180,000 189,000 1March,19

88 Wet Punjab

New Line 990,000 1,039,500 210,000 1,200,000 1,260,000 1April,1998 Aug-06 Dry Punjab

New Line - - 2,010,000 2,010,000 2,110,500 1 Jun-07 Dry Punjab

1,461,000 1,534,050 2,220,000 3,510,000 3,685,500 7.43%

15 Mustehkum - - 165,000 165,000 173,250 1 1965 Wet N.W.F.P

- - 165,000 165,000 173,250 1 1965 Wet N.W.F.P

- - 300,000 300,000 315,000 1 1981 Dry N.W.F.P

- - 630,000 630,000 661,500 1.33%

16 Pioneer 600,000 630,000 105,000 705,000 740,250 1October,

1994 Jul-05 Dry PunjabMay


8/20

19 Flying 600,000 630,000 - 600,000 630,000 1 Jan-05 Dry Punjab

- - 600,000 600,000 630,000 1 Nov-06 Dry Punjab

600,000 630,000 600,000 1,200,000 1,260,000 2.54%

19 SUB TOTAL 13,008,143 13,658,550 24,922,142 37,759,286 39,647,250 79.97% 38

SOUTH ZONE

Sr. Name of Unit Annual Capacities BMR Upgrated capacity % No. of Year of Year ofProce

ss Province

No. Clinker Cement Clinker Clinker Cement Age LinesCommis

sionupgradti

on

20 A.C.Rohri 50,000 52,500 - 50,000 52,500 1 1938 Wet Sind

180,000 189,000 - 180,000 189,000 1 1972 Wet Sind

230,000 241,500 - 230,000 241,500 0.49%

21 Attock. 720,000 756,000 - 720,000 756,000 1 1988 DryBaluchist

an

New Line - - 990,000 990,000 1,039,500 1 Jun-06 DryBaluchist

an

720,000 756,000 990,000 1,710,000 1,795,500 3.62%

22 Dadabhoy 504,762 530,000 - 504,762 530,000 1.07% 1 1985 Dry Sind

23 Al-Abbas 150,000 157,500 450,000 600,000 630,000 1 1989 Dry Sind

300,000 315,000 300,000 600,000 630,000 1 Aug-98 2006 Dry Sind

450,000 472,500 750,000 1,200,000 1,260,000 2.54%


9/20

26 Pakland 750,000 787,500 - 750,000 787,500 1 1985 Dry Sind

New Line - - 720,000 720,000 756,000 1 Oct-08 Dry Sind

750,000 787,500 720,000 1,470,000 1,543,500 3.11%

27 Pakistan Slag - 157,500 - - 157,500 0.32% 1 1994 Dry Sind

28 Thatta 300,000 315,000 - 300,000 315,000 0.64% 1 1982 Dry Sind

29 Zeal Pak 102,000 107,100 - 102,000 107,100 1 1956 Wet Sind

102,000 107,100 - 102,000 107,100 1 1956 Wet Sind

102,000 107,100 - 102,000 107,100 1 1960 Wet Sind

102,000 107,100 - 102,000 107,100 1 1963 Wet Sind

300,000 315,000 - 300,000 315,000 1 1969 Wet Sind

300,000 315,000 - 300,000 315,000 1 1969 Wet Sind

1,008,000 1,058,400 - 1,008,000 1,058,400 2.13%

10 SUB TOTAL 4,562,762 4,948,400 4,745,714 9,308,476 9,931,400 20.03% 22

29 GRAND TOTAL 17,570,905 18,606,950 29,667,856 47,067,762 49,578,650 100.00% 60


10/20

Worlds Cement Production (Qty = 000 tonnes)

Countries 2001 2002 2003 2004 2005

United States 90,450 91,300 92,600 99,000 99,100

Brazil 39,500 39,500 40,000 38,000 39,000

China 626,500 705,000 750,000 934,000 1,000,000

Egypt 24,500 23,000 26000 28,000 27,000

France 19,839 20,000 20000 21,000 20,000

Germany 28,034 30,000 28000 32,000 32,000

India 100,000 100,000 110,000 125,000 130,000

Indonesia 31,100 33,000 34,0000 36,000 37,000

Iran 26,650 30,000 31,000 30,000 32,000

Italy 39,804 40,000 40,000 38,000 38,000

Japan 76,550 71,800 72,000 67,400 66,000

Korea 52,012 55,500 56,000 53,900 50,000

Mexico 29,966 31,100 31,500 35,000 36,000

Pakistan 9,876 9,985 11,410 13,344 17,112

Russia 35,100 37,700 40,000 43,000 45,000

Saudi Arabia 20,608 21,000 23,000 23,000 24,000

Spain 40,512 42,500 40,000 46,800 48,000


11/20

Pakistans Cement Production(Million Tonnes)

Year Cement Production

1991 (June) 7.649

1992 (June) 8.115

1993 (June) 8.348

1994 (June) 8.1581995 (June) 8.159

1996 (June) 9.458

1997 (June) 9.539

1998 (June) 9.29

1999 (June) 9.5462000 (June) 9.969

2001 (June) 9.876

2002 (June) 9.988

2003 (June) 11.410

2004 (June) 13.3442005 (June) 17.112

2006 (June) 19.512


12/20

Pakistans Major Exports of Cement Products

Year Value Qty (Quantity) U.V (Unit Value)

Rs mln. M/tonnes Rs/mt

2001-02 0.107 ..

2001-02 0.430 ..

2002-03 1.160 ..

2003-04 1.565 ..

2005-06 1.505

2006-07 (Upto April 07) 2.453 ..


13/20

CEMENT INDUSTRY PRESENT SENERIO(TAXES, INVESTMENT & CAPACITY UTILIZATION)

Cement Machinery is manufactured Locally

Concessions to Local manufacturers is provided under

SRO 431(I)/97 C.D @ 10% SRO 435(I)/2001 C.D @ 0% on import of raw material not

manufactured locally.

TAXES

There is no concession on import of cement or cement manufacturingMachinery

Excise Duty: Rs. 750 per ton.. Sales Tax @ 15%

IMPORTS & EXPORTS

Cement Imports Nil (Custom Duty @ 25%)

Cement Exports

In 2001, after five slack years, the industry has started picking up thepace. According to the State Banks report, cement exports rose to158,666 tones during first half (H1) of 200349% higher than the sameperiod of previous yearand earned $3.5 million against $0.6 million ofthe same period in 2002.

INVESTMENT

Presently the cost of a new project is around Rs 6 billion (Chinese Plantof 3300 tonnes per day)

CAPACITY UTILIZATION


14/20

Cost to make and sell (Industry Average)Based on Audited Accounts - June 30, 2006

Variable Cost Rs./Tonne Rs./Bag1. Raw and Packing Material 328.10 16.41

2. Fuel and Power * 1,427.51 71.38

3. Stores & Spares Incl. Repair & Maint 154.96 7.75

Sub-Total: 1,910.57 95.53

Fixed Cost

1. Salaries & Wages 155.45 7.77

2. Depreciation 206.30 10.32

3. Admin & Selling Expenses 104.04 5.20

4. Financial Expenses 377.56 18.88

5. Misc. Expenses 94.80 4.47

Sub-Total: 938.15 46.91

Total cost of Production 2,848.72 142.44

Add: Federal Excise Duty 750.00 37.50

General Sales Tax @ 15% (Duty Paid Value) 540.00 27.00

Freight, Incidentals and Unloading 600.00 30.00

Margins of Distributor, Whole seller & Retailer 300.00 15.00

Manufacturers Profit @ 10% on Equity 500.00 25.00

Market Price 5,538.72 276.94


15/20

COST COMPARISON (FURNACE OIL VS COAL)

Furnace Oil

Furnace oil consumption per ton of output 85.0 Kg

Cost of furnace oil per ton of cement produced * A Rs 2,083.00

Coal

Coal consumed per ton of output 155.0 KgCost of using coal per ton of output B Rs 868.00

Saving per ton *** (A B) Rs 1,215.0

Saving per bag Rs 60.75

* @ Rs 24500 per ton

** Blending 70 percent imported with 30 percent indigenous coal at prices of 5,700 and 5,500 perton respectively, and having 6,050 Kilo Calories/Kg

*** if industry use furnace oil as fuel then per bag retail price would increase byRs. 70 per bag.

Source: All Pakistan Cement Manufacturing Association

Duties Comparison

Duties Comparison Pakistan (Rs / Ton) V/s India (Rs / Ton)

Excise Duty 750 0

Sales Tax 540 200


16/20

Source: Economic Survey

DEMAND

Unfortunately, Pakistan the recent past was trailing behind all other developingcountries in the region with lowest per capita consumption of cement as shownin the table

Country Per CapitaConsumption

(Kg)

Taiwan 1004 kgMalaysia 870 kg

Thailand 600 kg

Turkey 512 kg

China 410 kg

Syria 369 kg

Iran 274 kg

Mexico 251 kg

Philippines 220 kg

Vietnam 126 kg

Inflow of (FDI) Foreign Direct Investment(Million US $)

JulyMarch

Sector 1999-2000 2000-01 2001-02 2001-02 2002-03

Cement 0.1 15.2 0.4 0.4 0.5

Construction 21.1 12.5 12.8 9.9 11.1

Per Capita Consumption (Kg)

Taiwan

Malaysia

Thailand

Turkey

China

Syria

IranMexico

Philippines

Vietnam

Turkmenistan


17/20

Retail Prices of Cement in Different Countries

In Pakistan cement prices are lowest in the region while the cost of productionand taxation is high. A price comparison of 50 kg bag in Pakistans neighboringcountries is given below:

Pakistan India Afghanistan DubaiSri

LankaIran

Retail PricePer Bag

240 215 253 17 550 45,000

(PakRupees)

(IndRupees)

(Pak Rupees)(UAE

Dirham)(SL

Rupees)(Rial)

Rate for

Conversionin US $ 60.95 44.12 60.95 3.67 108.70 9,241.00

Price PerBag ($)

3.94 4.87 4.15 4.63 5.06 4.87

IndircetTaxes PerBag ($)

1.07 0.47 0.39 - 0.76 -

Net PricePer Bag ($)

2.87 4.41 3.76 4.63 4.30 4.87

NetEquivalentPak Rs.

175.00 268.62 229.00 282.18 261.86 296.80


18/20

RECOMMENDATIONS

We propose the following possible measures (Short term, Medium term and Long term) to save

the cement industry from collapse, restore the investor confidence and reduce the trade deficit.

Short Term Measures

Freight SubsidyVide public notice No. 2(6)2006-PPI dated 31st August, 2006 and in terms of the current

Trade Policy, 25% freight subsidy is provided to eligible products as defined in para 2(a)and (b) of the subject order. A negative list of countries and of products has also been

specified in Annexures I & II of the order. Cement products classified under H.S. Code

25.23 in Chapter 25 of Pakistan Customs Tariff have been placed on the negative list. In

view of the value added nature of clinker and cement, these merit being added to the list

of Developmental Products (on 6 Digit H.S. Codes) as detailed in Annexure III of the

order.It is requested that suitable amendments may kindly be made to the public order No.

2(6)2006-PPI dated 31st August, 2006 and its Annexures I, II, III & IV.

Duty DrawbackThe present export rebate on cement of Rs. 25 per ton with no draw back for export of

clinker has led to cement export by sea to come to a grinding halt. To make the exports

viable and increase the capacity utilization in the country, it is proposed that present

export rebate on cement of Rs. 25 per ton be increased to:

a For grey cement Rs. 142.48 per ton and Rs. 93.32 per ton for clinker. Calculationattached annex-A

b For white cement Rs. 167.02 per ton and Rs. 93.32 per ton for clinker. Calculationattached annex-B

Neighbouring countries like Bangladesh, Myanmar, Sri Lanka, and some of the Gulf

States, are regularly importing cement and if duty draw back rates are fixed as stated

above then, 4 to 5 million tons of cement / clinker can be exported every year. Port Charges

Port charges in Pakistan are very high as compared with other countries. Detail of these

charges is as under:Charges Pakistan India Qatar

(US $) (US $) (US $)

Port dues 0.34 0.09 0.12

Pilot age 0.30 0.16 0.11

Tug gage 0.05 0.16 0.03

Berth age 0.08 0.04 0.01


19/20


20/20

18

Documents

080124 Sector Cement BOI