At present, Pakistan's cement industry is full of announcements of capacity expansion, including mergers and acquisitions. In the past few months, three cement companies have announced plans to expand production.
Attock Cement (ACPL) has revealed that it will expand its production capacity to 1.1 million tons at a cost of $120 million. Prior to the announcement, Cherat Cement (CHCC) said it would spend $120 million to expand 1.3 million tons of cement production capacity. Dera Ghasi Khan Cement (DGKC) also disclosed that it would spend $300 million to add 2.5 million tons of cement production capacity.
Capacity utilization in the southern Pakistan cement market was at 87% in FY15, significantly higher than 75% in the northern region. Even if the expansion of DGKC in 2018 is completed as scheduled, the capacity utilization rate of local cement enterprises will increase with the growth of regional demand in fiscal years 2016 and 2017.
The dynamic competition in the southern market continues even during the overhaul of the enterprise. Currently, Lucky Cement (LUCK) has a 42% market share. ACPL and Dewan Hattar Cement (DCL) each have 21% of the market. After the completion of a new round of capacity expansion, ACPL's market share in the southern market will increase to 30%. The market share of LUCK and DCL will be reduced to 37% and 18% respectively. In the short term, if cement production capacity does not expand with the growing demand, cement companies can have higher prices. But after a few years, the competition in the market will intensify.
Now, the fierce competition in the southern market has begun. LUCK's market leadership in the region has been challenged by ACPL.
Attached: [Original] Pakistan Cement Market Full of Business Opportunities
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