The global cement industry currently commands a substantial $406 billion, and it is anticipated to expand to $545 billion by the year 2030. Global cement consumption stands at a staggering 4.1 billion tons, projected to grow by 4.3 percent annually. The burgeoning demand for cement has catalyzed an increase in manufacturing capabilities worldwide, prompting numerous countries to enhance their production capacities. Large-scale greenfield cement plants are being established across the globe. However, the industry grapples with two critical challenges: widespread overcapacity and the urgent need to transition to a net-zero carbon future. Notably, the cement industry contributes to approximately 5 percent of global man-made carbon dioxide emissions, a significant contributor to climate change.
The global cement industry currently commands a substantial $406 billion, and it is anticipated to expand to $545 billion by the year 2030. Global cement consumption stands at a staggering 4.1 billion tons, projected to grow by 4.3 percent annually. The burgeoning demand for cement has catalyzed an increase in manufacturing capabilities worldwide, prompting numerous countries to enhance their production capacities. Large-scale greenfield cement plants are being established across the globe. However, the industry grapples with two critical challenges: widespread overcapacity and the urgent need to transition to a net-zero carbon future. Notably, the cement industry contributes to approximately 5 percent of global man-made carbon dioxide emissions, a significant contributor to climate change.
It is intriguing to examine how the Pakistani cement industry intends to navigate these challenges, aligning its strategies with observed trends and threats in the global cement landscape. In Pakistan, the cement industry boasts an annual installed capacity of 83.18 million tons across 26 operating plants. However, during the fiscal year ending June 30, 2023, total cement sales or dispatches amounted to 44.58 million tons, reflecting a decline of 15.7 percent compared to the previous year. A detailed breakdown reveals that domestic cement dispatches accounted for 40 million tons, marking a decrease of 16 percent, while exports amounted to 4.58 million tons, witnessing an increase of over 13 percent compared to 2022. Key players in the industry include Lucky Cement, Bestway Cement, Fauji Cement, Maple Leaf Cement, and DG Khan Cement.
The consumption of cement in Pakistan is primarily driven by infrastructure and real estate development. However, economic slowdown, political instability, a significant reduction in the Public Sector Development Programme (PSDP), and a construction recession due to high inflation have impeded consumption growth. Consequently, cement production capacity utilization, though fluctuating in recent years, has declined from an optimal 94 percent in 2021 to 86 percent in 2022 to the current 57 percent. Analysts, nonetheless, express optimism and anticipate demand to grow by over 8 percent annually in the coming years, driven by the revival of the national economy and the launch of restructuring and rehabilitation programs.
Ongoing and forthcoming activities under the China-Pakistan Economic Corridor (CPEC) are expected to contribute to cement demand. Several under-construction mega projects in the water and power sectors have resumed construction, including Mohmand Dam, Diamer-Basha Dam, Dasu Hydropower, and Tarbela Hydropower 5th Extension. Upcoming projects, such as Bunji Hydropower, Keyal Khwar Hydropower, and Chashma Right Bank Canal, are set to commence construction. Additionally, various housing, roads, highways, and public infrastructure development schemes planned by the government will further stimulate demand.
As the 12th largest global exporter of cement, Pakistan achieved export revenues of $323 million this year. Afghanistan stands as its major export market, driven by increased demand due to reconstruction activities. Despite regional competition, Afghanistan continues to promise substantial export opportunities for Pakistani cement. Other existing export markets include Gulf States such as the UAE and Kuwait, along with Middle Eastern countries experiencing a consistent rise in cement demand. With the Gulf construction sector witnessing the launch of construction projects valued at $24.7 billion in 2022, the domestic cement industry has vast opportunities to secure an additional share of this lucrative market. Potential markets for Pakistani cement include Bangladesh, Nepal, Sri Lanka, and South Africa. The industry is actively pursuing the expansion of its export market, targeting countries like Qatar and Madagascar, in addition to its current exports to Afghanistan and South Africa.
Large-scale capacity expansion is being undertaken by many cement companies to capitalize on projections of high cement demand, particularly in export markets. Recently entering a new phase of capacity expansion, with an additional 16 million tons cumulative capacity expected to be completed by 2025, Lucky Cement, the largest cement producer, has commissioned a 3.15 million tons per year plant at Pezu (Khyber Pakhtunkhwa) in January 2023. Similarly, Bestway Cement has commissioned a brownfield plant of 2.63 million tons annual capacity at its Hattar (Khyber Pakhtunkhwa) cement plant in February 2023. In October 2022, Bestway Cement established a greenfield cement plant of 7,200 tons per day at Mianwali (Punjab). Fauji Cement commissioned its 6,500 tons per day capacity greenfield project in November 2023 and has undertaken two expansion projects, each with a capacity of 2.05 million tons per year, at Nizampur and DG Khan Sites in Khyber Pakhtunkhwa. Maple Leaf Cement recently undertook a brownfield expansion of 7,000 tons per day capacity at Iskanderabad (Mianwali). In addition, new greenfield cement projects are coming up in Punjab and Khyber Pakhtunkhwa.
The per capita annual consumption of cement in the country is currently 215 kg, in stark contrast to the world average of 550 kg. This apparent gap signals promising potential for increased consumption in the future, justifying the planned large capacity expansion. However, the industry must address challenges such as high energy costs, increasing competition, underutilized production capacity, and environmental regulations. It should not lose sight of the fact that its survival and sustainability lie in consolidating its domestic market, as the construction boom in neighboring markets may not last long.
Material sciences are rapidly evolving globally, with advanced construction materials being produced to enhance quality, strength, and efficiency in concrete construction. Therefore, the industry should invest in advanced cement technologies over both short and long-term horizons, particularly in response to the recent global emphasis on “green cement.” Cement production generates emissions of carbon dioxide, oxides of nitrogen, sulfur dioxide, and waste that includes ash, sludge, and dust. It is imperative to develop new products, such as zero-carbon construction materials, that are environmentally sustainable and cost-effective.
The industry must adopt a long-term vision, emphasizing measures to reduce current production costs further through improving production efficiency, conserving energy, and employing advanced techniques, such as the installation of advanced process systems, use of electric kilns, increased emission controls, and developing bulk handling systems.
The writer is retired Chairman of the State Engineering Corporation
