In the last six or so years, cement industry has expanded its production capacity by over 100 per cent and made inroads into the export market. But the industry has been facing charges of unfair trade practices from time to time like cement companies in other countries.

With a Rs200 billion investment, the industry now gives a total production of 39 million tons against 17 million tons in 2002. It entered the export market in a big way in fiscal 2007-08. The domestic consumption too has doubled over last six years because of buoyancy in housing sector financed by rising remittances and liberal bank credit.

“And with the rise in domestic demand, came an abrupt spurt in export market particularly in neighbouring India and the UAE which has created supply constraints,. cement price hike and rising complaints from the major consumer, the Association of Builders and Developers’’, an analyst in a privatised bank explained.

“The solution was not a raid on APCMA office in Lahore by the Commission but a round table of all stakeholders — cement makers, its users, the government and banks ---to work out a consensus settlement’’ the analyst suggested.

Cement export in 2007-08 has jumped up by more than 147 per cent to more than $410 million and the industry is now confident of netting in two billion dollars in the current fiscal year.

As the cement export to India, the UAE and Africa increased, the domestic prices also swelled from Rs355- Rs360 a bag of 50 kg to Rs390 and even exceeded Rs400 a bag in some places. It created a lot of hue and cry.

Officials of newly set up Competition Commission, which has more powers under the law but without any resources to execute these, raided the offices of All Pakistan Cement Manufacturers Association (APCMA) in early May. The commission team involved in the raid also took away computers and related documents. “We were treated like terrorists’’, laments retired Major General Rehmat Khan, the acting Chairman of APCMA on telephone from Islamabad.

He contended that production and dispatches of cement figures are shared by every cement company with the government on a monthly basis. “So what’s the big deal in knowing these facts’’, he said.

But the APCMA does not put its production, dispatches, sales and export figures regularly on its website. In fact, its data from website has been withdrawn since long. The acting Chairman of APCMA conceded the fact that people are not being kept update on performance of the industry. But he attributed this default to lack of technical people in APCMA office. “We are hiring people to keep all updated on industry”, he assured.

Cement industry should have been under pressure in 2007-08 because of the uncertain political situation that prevailed.

The government’s public sector development programme moved slowly and construction business too slowed down. But the demand from India and the UAE was such that it not only compensated for the domestic slump but brought boom for the industry.

However, the industry leaders do not subscribe to the view that they have made good amount of money during last fiscal year or are making money now. “Out of 22 listed companies, only three showed some earnings in first three quarters of the year,” retired General Rehmat said. The financial results of 19 cement companies are in red, he added.

He singled out rising fuel cost as a main contributing factor for pushing up production cost. “We moved away from furnace oil to coal in eighties by investing almost Rs300 million” when coal was just $22 dollars a ton, he recalled. “It is now more than $200 a ton” he said pointing out that the cost of utilities, labour , transportation and financial charges have also increased simultaneously.

Market analysts however are not ready to buy this said that biggest advantage of domestic cement industry is availability in abundance of lime stone which is its primary raw material. “Hardly, any other country has this advantage’’ he said. He lamented that the domestic cement industry did not use to full potential — the technical and production capacity of Heavy Mechanical Complex, Heavy Forge and Foundry, Pakistan Machine Tools Factory and Karachi Shipyard in preparation of plants and equipments. “Had this been done, the project cost of a cement plant would have been much less’’, he believes.

Nonetheless, the market is confident that cement industry will expand its capacity in cement in the years to come as there is raw material in abundance. Local coal may be able to replace imported coal and there is going to rise in demand, both at home and in export market.

At present, there are four big companies that share more than 40 per cent of production and market. These four companies set the trend of production and pricing. Market analysts expect acquisitions and mergers once the political turmoil settles down and some direction is set for future.

The expectations are that most of mergers and acquisitions will be in South—Sindh and Balochistan—where new projects are also expected to be planned.

India is the second biggest cement producer in the world but its domestic demand is also growing. So may be the case in Afghanistan, Iraq and in Pakistan where demand for cement may show a phenomenal growth in future.

But as it looks,. cartelisation and cement industry go together in Pakistan and elsewhere in the world. The industry is under probe of Monopoly Control Authority. It was penalised in 2003 for unfair trade practices. It is still under probe but the Competition Commission officials say that they lack resources as the 2008-09 budget did not allocate any money for them. The commission is under pressure of various government and private lobbies.

Elsewhere in the world too, the cement industry remains a favourite target of anti-cartel authorities. In neighbouring India, some 44 companies were probed a few years ago. The European Commission fined French giant Larfarge of about 150 million euros on charges of bad trade practices. Larfarge in Pakistan is also said to be running in loss.