Cement makers see China-led bonanza as Pak spends billions

Bloomberg

In his air-conditioned office protected from the scorching heat and dust outside, S.M. Imran points at a white lined map pinned on his wall showing Power Cement Ltd.’s planned expansion at its plant in Pakistan’s arid southern Sindh province.
Power Cement is aiming to triple capacity, riding a wave of Chinese-financed infrastructure projects across Pakistan valued at more than $50 billion. It’s part of Chinese President Xi Jinping’s biggest gambit in his “One Belt, One Road” project to rebuild the ancient Silk Road, a trading route of ports, railways and highways snaking across mountains, deserts and disputed territory through Asia to Europe and Africa.
The anticipated demand has been a boon for Pakistan’s cement industry, which is expected to increase capacity by 56 percent to 70 million tons in five years, according to Karachi-based brokerage Alfalah Securities Ltd.
“We used to carry stocks, but not anymore,” said Imran, a project director and cement industry veteran who has been in the business for four decades. “This capacity will be required.”

MEGA PROJECTS
Cement-makers are betting Prime Minister Nawaz Sharif will ensure timely completion of much needed infrastructure projects ahead of next year’s election, which the premier is widely expected to contest for a second consecutive term.
With that in mind, the government has committed to a $9.6
billion expansion of the natio-
nal roads network, such as the Karakoram highway — the main trade route between China and Pakistan — along with about
$35 billion on energy projects and power plants to end daily blackouts.
Encouraged by the China-Pakistan Economic Corridor, or CPEC, Gharibwal Cement Ltd. is doubling capacity to more than 13,000 tons a day by August, according to company spokesman Rana Muhammad Ijaz, who said its existing plant is producing at its peak. Power Cement Ltd. is boosting its ability to churn out 10,700 tons a day, while Cherat Cement Co. announced plans to build a third unit days after completing a second, with a capacity of 7,100 tons a day.
Cement stocks have also outpaced the nation’s benchmark stock measure, with a group of
21 companies rising an average
47 percent in the past year, compared to the KSE100 Index’s 34 percent gain.
“The demand isn’t going down because of a boom in the construction sector,” Ijaz said. “Mega projects are being built and the CPEC is a key factor for this boom.”
Pakistan is among the world’s fastest-growing construction markets and is expected to grow an average 12 percent annually for the next five years, according to a BMI Research report published last month. Cement capacity utilization increased to 88 percent in the 10 months through April, the highest in 11 years, while exports declined 19 percent, indicating an increase in local consumption, according to the All Pakistan Cement Manufacturer Association.