Pakistan's Double Digit Growth in Cement Demand in January

Domestic cement consumption surged 10.10% in Pakistan in January 2013, according to All Pakistan Cement Manufacturers Association. On top of 8% increase in Fiscal Year 2011-12, it jumped another 8% for the first seven months of Fiscal Year 2012-13.

Cement production is an important barometer of national economic activity,  according to a research report compiled by a Credit Suisse analyst.  Last year, CS analyst Farhan Rizvi said in his report that "higher PSDP (Public Sector Development Program) spending has led to a resurgence in domestic cement demand in FY12 (+8%) and with increased PSDP allocation for FY13 (+19%) and General Elections due in 2013, domestic demand is likely to remain robust over the next six-nine months".

Ongoing public sector projects include new large and small dams, irrigation canals, power plants, highways, rapid transit systems, flyovers, airports, seaports, etc. Most of these were already in the pipeline when the PPP government assumed control in 2008. Recent pre-election increases in PSDP funding allowed work to resume on these projects in 2011-12.

 In addition to public sector infrastructure projects, there is a lot of privately funded real estate development activity visible in all major cities of the country.

Ocean Tower Karachi
Among the high-profile new construction projects completed this month is Ocean Tower in Karachi. At 393 feet high with 30 floors, it is now the tallest building in Pakistan. Ocean Tower has a shopping mall, food courts, corporate offices, a business club, car-parking area and 4 cinemas.

The Centaurus Islamabad
The Centaurus, at 361 feet, is another new project in Islamabad completed this month. It consists of three towers---office tower, residential tower and a 5-star hotel. The three will be linked by a shopping mall.

Big real estate developers like Bahria Town and Habib Construction are developing both commercial and housing projects in Islamabad, Karachi and Lahore. Other cities like Faisalabad, Hyderabad, Larkana, Multan, Mirpur, Peshawar and Quetta are also seeing new housing communities, golf courses, hotels, office complexes, restaurants, shopping malls, etc.

Per capita cement consumption in Pakistan was only 70 Kg in 2003. It has more than doubled in the last decade.  With back-to-back increases in domestic cement demand, per capita consumption has now risen to 154 Kg which is still below average for Asia. But the rising demand is a good sign of economic recovery since 2009 when the GDP growth hit a low of 1.7%.

Centaurus Mall Opening Day

Credit Suisse is bullish on Pakistan's cement sector in particular and Pakistani shares in general.

CS analyst Farhan Rizvi has initiated coverage with "an OVERWEIGHT stance, as we believe compelling valuations, improving domestic demand outlook, better pricing power and easing cost pressures make the sector an attractive investment proposition. Despite better growth prospects (3-year CAGR of 17% over FY12-15E) and improving margins, the sector trades at an attractive FY13E EV/EBITDA of 3.8x, 49% discount to the historical average multiple of 7.4x. Moreover, FY13E EV/tonne of US$74 is approximately 29% discount to historical average EV/tonne of US$104 and 50% discount to the region".

A New Housing Construction Project in Rawalpindi

Another CS analyst Farrukh Khan, based in Credit Suisse’ Asia Pacific headquarters in Singapore,says in his research report that “liquidity in 2012 has been concentrated in stocks offering positive earnings surprises (e.g., United Bank, Lucky Cement, DG Khan Cement and Bank Alfalah), enabling them to be strong outperformers. With further improvements in liquidity, we expect a broad-based price discovery to take hold in attractively valued oil and fertilizer stocks as well.”

 A string of strong earnings announcements by Karachi Stock Exchange listed companies and the Central Bank's 1.5% rate cut have already helped Karachi's KSE-100 index surge nearly 50% (37% in US $ terms) in 2012 to top all Asian market indices. It was followed by Bangkok's SET index which advanced 36%. It also easily beat India's Sensex index which was the top performer among BRICs with 25.19% annual gain.

Related Links:

 Haq's Musings

Pakistan's GDP Grossly Underestimated, Shares Highly Undervalued

Investment Analysts Bullish on Pakistan

Precise Estimates of Pakistan's Informal Economy

Comparing Pakistan and Bangladesh in 2012

Pak Consumer Boom  Fuels Underground Economy

Rural Consumption Boom in Pakistan

Pakistan's Tax Evasion Fosters Aid Dependence

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers

Land For Landless Women in Pakistan

Pakistan's Circular Debt and Load-shedding


Riaz Haq said…
Karachi is now following the example of Lahore to build a mass transit system...a combiatiion of trains (Karachi Circular Railway or KCR) and buses (Bus Rapid Transit or BRT). Here's an ET report:

KARACHI: Progress on the much-awaited Bus Rapid Transport System project is expected to move a step further, when the government awards consultancy rights to a consortium of companies led by the global auditing firm KPMG, officials told The Express Tribune on Monday.

KPMG has been hired as the financial adviser for the project, with the National Engineering Services Pakistan (Nespak) and Mohsin Tayebaly and Company responsible for technical and legal affairs, respectively.

While the formal agreement is expected to be signed in a few days, it would take another 13 months before construction kicks off on the first part of the project, the 22-kilometre-long Yellow Line, which would connect Dawood Chowrangi in Landhi to Numaish in Saddar. Nespak is already undertaking the BRTS project in Lahore, which is near completion.

“Now we would decide what needs to be done with the route. For example, deciding whether there is a need for [creating] an overhead passage at any point,” said an official. “A feasibility study needs to be carried out before we can finalise costing and other financial details. Finally, we will look for an investor.” The Karachi Metropolitan Corporation (KMC) had earlier put the expected cost of the Yellow Line at around Rs2 billion, and set 2014 as its launch year.

The transit system involves dedicated buses lanes, which would crisscross roads and bridges. Around 13,000 passengers are expected to use the system in Karachi every hour, which would cut current travelling time by almost half. Buses will run on reserved tracks, at an average speed of 25 kilometres per hour (kmph), well above the average vehicular speed in the city of 17 kmph....

Here's a BR report on KCR:

The ECC which met here under the chairmanship of Minister for Finance and Economic Affairs Dr. Abdul Hafeez Shaikh was informed that Japan International Cooperation Agency (JICA) has already agreed to provide 93.5pc ($2.4 billion) of the estimated cost through soft loan at a markup of 0.2pc payable in 40 years including 10 years grace period. The remaining 6.5pc ($169.6 million) will be borne by the Ministry of Railway (60pc equity), Government of Sindh (25pc equity) and the City District Government Karachi (15pc equity); the stakeholders of KUTC as per their share.

The track of the KCR will be 86 km long with 27 stations to be built around the city.

This important project will be a milestone in improving the quality of life of the citizens....
Riaz Haq said…
Here's more from ET on Lahore Metrobus:

A total of 45 buses have been imported from Turkey which will be driven by Turkish drivers on a single track in Lahore. The buses will stop at 27 stations that cover the entire Lahore. First station is at Gaju Mata and the last one is at Shaadra.

A one-of-a-kind nine kilometer long flyover has been constructed solely for the metro bus. It connects one end of Lahore with the other. Buses will commute on this flyover. The modern system of electronic ticketing has been introduced at all the stations; waterproof escalators have been installed for the elderly, and a squad for security and maintenance has been appointed.

The stations and the entire route of this larger-than-life metro system are up to international standards. Commuting in Lahore will now become as easy as commuting in London city or Bangkok. The only difference is we will have buses instead of trains and they will be manual instead of electronic.

The inauguration of this mega project is today.

After being postponed a couple of times, Shahbaz Sharif has finally given the confirmed date. For the initial four weeks, the buses will be free for all the commuters. However, the fare is extremely cheap. From what I’ve heard, the cost of a ticket from the first to the last station will be as low as Rs45!

Until now, every feature of this yet-to-function project seems to be perfect, but will it be successful?

Will the squad for maintaining cleanliness and security live up to the expectations?

Will all the 45 buses work efficiently for a long period of time?

Most importantly, how will the masses react to this state-of-the-art system?
Riaz Haq said…
Gold imports in Pakistan up 23% July-Nov 2012, reports Daily Times:

KARACHI: Yellow metal imports during July to November 2012 in the country increased by 23 percent or Rs 7.12 billion as against Rs 5.78 billion in July to November 2011, precious metal importers said on Thursday.

The traders imported around 1,393 kilogrammes (kgs) of gold during this period, they added.

In November 2012, gold imports stood at 298 kgs worth Rs 1.57 billion, which was up around 357 percent as compared to November 2011.

Due to lower international prices of the yellow metal, import reamined on the higher side in November 2012 as it dipped around $128 an ounce, said a metal expert in London Saleem Ahmad.

Usually yellow metal importers make deals for the precious commodity with traders in Dubai, India and South Africa.

Major deals are made with Dubai based gold traders while due to lower gold future prices in India, the domestic traders also made deals. In India the gold prices are hovering around Rs 32,000 per 10 grammes while in Pakistan 10 grammes of gold is available at around Rs 53,200.

Rising demand in domestic markets for the wedding season also pushed gold imports up besides declining international prices also attracted the domestic importers to fortify their long position in anticipation of futures rising prices. Gold remained a haven for the hedging purpose besides it is the safest investment for hedgers as compared to stocks, where shares prices are always uncertain.

Gold prices in Pakistan bullion market are hovering at around Rs 62,200 per tola. Safest haven for investment hedging became the driving force behind buying, he added.

The yellow metal import’s rise was attributed to large buying by institutional and hedge fund that kept the momentum of the gold price to go up besides physical buying from India and China.

Hedging in gold is still on the higher side as it touched a new high around 80 percent in 11 months of 2012.

Meanwhile, the gold importers demanded of the government to announce duty cut on import of the commodity.

The government should announce around Rs 100 per tola duty cut in order to lower its prices in the domestic market besides providing relief to exporters of gold ornaments in the international market.

Currently the duty on import is around Rs 550 per tola and due to higher dollar value against the rupee, the local demand for the commodity is declining.

The government should provide duty relief on 3.0 kgs imports of gold on every 10 kgs of jewellery exports, exporters demanded.

Gold is expected to touch $1,800 an ounce in the next year or so on back of the Fed measures to boost interest in gold exchange-traded funds, among the vehicles that issue securities, backed by physical metal.\12\28\story_28-12-2012_pg5_3
Riaz Haq said…
Here's Emirates 24-7 report on a massive property investment deal between Abu Dhabi Group and Malik Riaz:

UAE’s Abu Dhabi Group and Pakistani real estate tycoon Malik Riaz on Friday signed a deal to invest $45 billion (Dh165.15 billion) in Pakistan including building the world’s tallest building in Karachi.

Pakistan’s news channel Geo reported today that $35 billion (Dh165.15 billion) will be pumped in Sindh province while the rest will be invested in Lahore and Islamabad.

Under the deal, Sports City, International City, Media City, Educational and Medical City will be built in Pakistan’s financial capital. The news channel said that world’s Seven Wonders will also be built as part of the project.

The deal is expected to generate over 2.5 million jobs in Pakistan.

The channel, however, didn’t reveal the time for the completion of the project.
Riaz Haq said…
Here's an ET report on soaring profits at Nestle Pakistan:

Profits at Nestle Pakistan shot up in 2012 as the company saw its margins increase for the first time in four years, as more and more consumers from Pakistan’s rising middle class are able to afford some of its higher-margin products.

On Monday, the company announced its financial results for the year ending December 31, 2012 – and it was a remarkably positive report: net revenues were up 22% for the year to Rs79 billion, and profits up an even higher 25.6% to Rs5.9 billion compared to the same period in the previous year.

The strong revenue growth for Nestle is particularly remarkable, considering the fact that it is the largest food and consumer goods company in the country, and yet still shows little sign of a slowdown in growth. Indeed, much of that growth appears to be volumetric, showing that consumers have a higher demand for Nestle’s products rather than revenue increases simply being a function of inflation.

But perhaps most encouraging for the company was its increase in gross profit margins, which rose from 25.8% in 2011 to 27.2% in 2012, suggesting that the company is selling more of its higher-margin products. At least some of that higher margin, however, was eroded by higher logistics and distribution costs.

Part of the reason for those higher costs is the installation of more refrigerators as more of its chilled products get sold (mostly yogurt). But another part of it may be that the company is expanding its distribution network into areas where transportation infrastructure is poor and cost of getting products to customers is higher, driving up its overall average.

Nonetheless, Nestle’s size in Pakistan – though miniscule by global standards – appears to insulate it from the kinds of risks that some of its smaller competitors face. Engro Foods, for instance, has somewhat higher distribution costs as a percentage of revenues than Nestle.

Nestle Pakistan’s Swiss parent is the world’s largest food company, with a wide array of products: from those that are commodity-like, to higher-margin products like health foods and chocolates. In Pakistan, however, Nestle has, until recently, been primarily a dairy company. Indeed, until the early 2000s, Nestle’s presence in the country was incorporated as Nestle Milkpak Ltd, named after its signature product. It remains the largest player in the dairy market, collecting milk from an estimated 190,000 farmers spread over 145,000 square kilometres in Punjab and Sindh.

Over the past few years, the company has expanded its product portfolio in Pakistan to include fruit juices, breakfast cereals, instant noodles and confectionaries. But it is still a small proportion of its global portfolio.

Nestle’s ability to rapidly grow its revenues and profits despite being the biggest player in Pakistan appears to be indicative of the tremendous room for growth in the Pakistani market. Consumer spending is expanding as the country’s middle class grows on the back of rapid urbanisation, and increasing household incomes as more and more young people enter the workforce.

Even the advent of a strong local rival in the form of Engro Foods does not appear to have dented Nestle’s growth prospects. In earlier conversations with The Express Tribune, officials at both Nestle and Engro Foods are keen to downplay any talk of a rivalry between the two companies, insisting that there is plenty of room for both to grow. Considering the blowout growth at both firms, there appears to be considerable merit to their argument.

The global giant is currently on track to invest upwards of CHF320 million ($347 million) in expanding its production capacity within Pakistan as part of a three-year plan.
Riaz Haq said…
Here's an ET Op Ed by LUMS' Professor Rasul Bukhsh Rais:

I have a serious problem with the cynic brigade that writes and comments on social, developmental and political issues along familiar lines. What is their familiar line? The Taliban are coming, extremism is on the rise, corruption is pervasive and life is miserable. This is a partial truth, not the whole truth. That nothing can change is a viewpoint that conflicts with history and the evolution of societies.

Cynicism in hard times like ours and in a climate of fear, insecurity and violence, sells and viewers and readers readily embrace the dark side of things rather than looking at what is bright and shining. The other issue is the habit of most of my colleagues and columnists to write from the comfort of their offices or homes. They tend to look at the big picture that gives a disturbing spectre rather than examining achievements at local levels, and by dedicated individuals and communities. If there is any meaningful and real change in Pakistan, it is taking place at these levels in every aspect of the social and economic life of this country. By missing details of development and positive change at the smaller scale, we may draw a big picture of a society and country that may not be in agreement with reality. This is what is unfortunately happening.

One of my social beliefs is that only by changing at the local level will Pakistan change for the better at the national level. The national in spatial terms is nothing but local. By often travelling through the villages, mostly in Punjab, I have seen thousands of positive contributions and developments that are neither documented nor narrated. Never has our regular cynic brigade opened its eyes and minds to what this change is and how it is becoming a catalyst for more and larger changes.

Let me share one man’s gigantic contribution at a government agricultural research farm in Bahawalpur. I had heard about Mushtaq Alvi for his collection of berries and date palm trees for some years. Last weekend, I had the opportunity to visit this fabulous farm, which may not be noticed from outside the walls. Mr Alvi, as a young man with his first job, started the plantation in 1985. He went to every place in Pakistan to collect the best local species of date palms, berries, mangoes, guavas and pomegranates. Today, he has 35 species of date palms, 20 of berries, 20 of mangoes and five of pomegranates, and almost every of guavas. Never has his search for new findings ended.

While the collection continues to expand, the farm has supported thousands of farmers and households that would like to have various species of these trees. Every season, thousands of berry plants and hundreds of date palms are distributed. Then there are private collectors of these trees that have developed their own farms and would like to sell plants to new farmers. Each new tree becomes a source for saplings leading to further proliferation.

Scientists like Mr Alvi and many of his colleagues may move on to other research stations or retire but what they have done is something remarkable. This is just one example of ordinary Pakistanis making a difference to society. Unfortunately, our media, commentators and pseudo intellectuals cannot lift their eyes from what is wrong in society and shift their attention, even for a moment, to what is right and working.

Recognition and celebration of achievements by individuals and communities encourages positive change, positive attitudes and stimulates energies for innovation and more contribution. While grieving about the many things that are troubling us, let us not ignore the pleasing side of changing Pakistan. Go out and see it.
Riaz Haq said…
Here's Khaleej Times on incentives in Pak foreign investment policy:

Pakistan has offered major financial and tax-free business incentives and infrastructure facilities to foreign investors as a big Saudi steel mills goes on stream.

These incentives were offered at the highest level by Prime Minister Raja Pervez Ashraf. The prime minister’s came on the occasion of the inauguration of production at the just-built state-of-the-art Tuwairqi Steel Mills Limited (TSML), built by Al Tuwairqi Group of Industries of Saudi Arabia, and South Korea’s Pohang Iron and Steel Company (Posco). Al Tuwairqi Group has invested $350 million and Posco $16 million in the project. This first phase of TSML has been completed at a cost of $366 million. It will produce 1.28 millions tonnes of steel annually. It is the first steel mill in Pakistan built by the private sector.

The inauguration ceremony was highlighted by the prime minister’s unveiling of the pro-FDI incentives plan. Prime Minister Ashraf invited foreign and local investors to come up with industrial projects to be located at Pakistan’s Export Processing Zones (EPZs).

Pakistani EPZs have all modern infrastructure. “I urge foreign investors from across the globe to invest in Pakistan. I assure you full government support, facilities, a business-friendly environment and policies. At our EPZs we provide you with a huge number of incentives and exemptions,” he said.

The key features of Pakistan’s investment policy include, equal treatment to Pakistani and foreign investors, 100 per cent share holding in projects and businesses, an unlimited repatriation of the dividends, annual and accumulated profits. Highlighting these incentives, and still many more, the prime minister asked foreign investors, particularly those from Islamic countries, “to benefit from Pakistan’s EPZs.”
“We at Al Tuwairqi, feel honoured in introducing the world’s most advanced DRI technology, based on the Midres process, owned by Kobe Steel of Japan, in Pakistan,” he said.

TSML is also embarking upon several new projects, subsequent to commercial operation of DRI project. It plans to work on the upstream and downstream production processes, involving billet/thin slabs production, and iron ore exploration in Pakistan, its beneficiation and pelletisation.

“As our social corporate responsibility, we are also focused on the clean power generation in Pakistan,” Dr Hussain said. “We see Pakistan as a land of immense opportunities. We are very clear in our perception that Pakistan, as a country has to grow, and we are determined to play an instrumental role towards its development. In the survival of Pakistan is the survival of the entire Muslim Ummah,” he said.

Posco chairman and CEO Joon-Yang Chung, said: “The TSML will significantly contribute towards Pakistan’s economy.”

“Today, Pakistan’s economic development and structural adjustment calls for a higher quality steel products to be manufactured in this country. At TSML, we will develop high-performance products, featuring high strength, corrosion resistance, sustainability and light- weight, and improve the technological competence related to such products. To add to its success, Posco is determined in building a successful partnership with Al Tuwairqi to benefit from its presence in Pakistan and is fully focused to make TSML a world class steel making unit through possible expansion of initially set DRI plant using forward and backward integration,” added Chung.

With all stakeholders so determined, and so upbeat, output of high-grade products, and larger investment inflows look all set to benefit Pakistan.
Riaz Haq said…
Here's Gulf News on various sectors of the economy in Pakistan:

Naveed Vakil, director, research and business development, AKD Securities:

Oil and Gas Development Company Limited (OGDCL): Dollar-based returns and a firm oil price outlook should keep returns high, especially as key development projects come online and the monetisation of recent finds is fast-tracked.

Pakistan Oil Fields (POL): [Its performance is closely linked] to international oil prices that are likely to remain firm in the near term as demand growth recovers, especially from China. POL also offers exposure to Pakistan’s Kohat Basin which is where there has recently been a string of discoveries have been high impact.

Pakistan Telecommunication Company Limited (PTCL): PTCL should post strong earnings growth this year, due to higher margins following the implementation of higher international incoming call rates. Infrastructure is being installed to curtail grey incoming international traffic, which should support legitimate volume as well.

Lucky Cement: Pakistan’s largest cement company should continue benefitting from a rise in domestic consumption led by development spending ahead of the elections. It should benefit from high margins as domestic cement prices remain firm while coal costs remain low.

Furqan Punjani, deputy head of equity research at BMA Capital Management Limited:

Oil and gas

Robust oil prices coupled with [increasing production volumes should] keep the oil and gas exploration and production sector in the limelight in next few years. Revenue streams linked to the dollar and local currency depreciation would also help augment bottom-lines in the sector. We prefer Pakistan Oilfields and Pakistan Petroleum because of their better dividend yields.


Based on better exports prospects and higher profit margins (on low cost cotton) as well as a promotion in the gas allocation list by the government, the textile sector has made it onto our list of top investment ideas for 2013. Nishat Mills is the biggest integrated textile unit in Pakistan and will continue to benefit from its well-diversified core operations and the good potential of its portfolio holdings.


We believe the fertilizer sector presents an ideal mix of defensive and high-growth plays for 2013. Our top pick in the sector is ENGRO.


Cement prices are currently at an all-time high of Rs440(Dh16.27) a bag. We like companies that can magnify top line growth into the bottom-line, thanks to the deleveraging of their balance sheet. This makes DGKC.PA our top pick in the sector.


Pakistan is an energy deficit country and the entire production of independent power producers (IPPs) is consumed on any given day. Moreover, with higher and regular subsidies from the government translating into better cash inflows, the sector has once again come into limelight. Furthermore, as revenues and profits are linked to the dollar, the depreciating Pakistani rupee will also benefit this sector. We prefer Hub Power Company, the largest private sector power producer of Pakistan, because of its higher dividend yields and stable bottom-line.

Commercial banks

The Central bank of Pakistan has reduced the base [interest] rate by 450 basis points in the last 24 months. This has reduced the net interest margins of the entire banking sector, barring a few large banks that have the ability to reduce the rates provided to their depositors and keep attracting fresh deposits at lower rates. United Bank Limited is one of them. We prefer UBL [because] of their ability to grow their deposits by double digits at lower cost, coupled with their greater exposure to high yielding long term government bonds. Furthermore their quarterly payout will continue to lure value investors to the bank. ....
Riaz Haq said…
Here's excerpt of an NBC report on Waziristan agency of FATA in Pakistan:

MIRANSHAH, Pakistan — It's been called the most dangerous place in the most dangerous region on the planet.

A rugged swathe of tribal territory nestled between Pakistan and Afghanistan, Waziristan is ground zero for some of the region's most notorious militant groups and warlords, including the Pakistani Taliban and Haqqani network.

North and South Waziristan are hit by more U.S. drone attacks than anywhere else in the world.

NBC News obtained rare access to South Waziristan and last week became the first foreign team of journalists to report from North Waziristan.
At the heart of the army's plans to rebuild the area is a 370-mile road — funded in large part by USAID money. The road, half of which is complete, will connect the isolated and insular tribal communities to each other, as well as the rest of mainstream Pakistan and to trading routes across the border in Afghanistan.

When finished, the roadway will offer a third link from Pakistan to Afghanistan, and the army hopes, will encourage business development along its path through Waziristan.

In addition to the road project, the army has taken on development projects far outside its traditional roles.

Along with the markets, two military schools, known here as Cadet Colleges, were built in South Waziristan to offer young men a rigorous education and boarding-school environment, unlike any educational opportunity available in the region before.

Col. Zahid Naseem Akbar, principal of the Cadet College, Spinkai, said he hopes the school will gives boys in the area the same opportunities as those elsewhere in the country.

"They have the same potential as any other citizen of this country has," Akbar said. "And I think we owe it to them that we provide them the opportunity to join the mainstream."

The army is overseeing the rebuilding to schools demolished by the Taliban and building schools for the first time in some areas, including for girls. The military established the Waziristan Institute for Technical Education -- a vocational school to train young men who missed their early education during Taliban rule.

And the army is restoring water supplies and electrical systems and funding what they call "livelihood projects," training and empowering local small businesses in everything from honey bee farming and fruit orchards, to auto repair and transport services.

"The strategy that the Pakistan army has adopted is a people-centric strategy," Hayat said. "So the more areas you've able to clear, the more infrastructure you're able to build, the more people you are able to bring back and sustain. Provide them economic opportunities. That is the measure of success."

Ideal habitat for Taliban
Frontline commanders all say the battle for Waziristan will not be won with hearts and minds alone. Security operations continue, gradually increasing what they call their "elbow space" in the region.

Both North and South Waziristan feature snow-capped peaks, deep valleys, hidden caverns, and daunting mountain ranges which provide natural cover. It's the ideal habitat for the Taliban and other groups seeking refuge and covert routes for travel between Afghanistan and Pakistan.
Riaz Haq said…
Forget the BRICs; Zambia, Estonia and Pakistan are the place for alpha investors, argues former Golaman Dachs executive Dambisa Moyo in a piece on :

The search for superior, uncorrelated risk-adjusted returns continues, and savvy investors such as endowments and family foundations are turning their attention to the frontier markets. Such markets exclude the BRICs, many of which posted sizable equity returns of over 30% last year, including Nigeria, Estonia, Pakistan, and Kenya. The MSCI Africa sub index posted one-year returns of over 60%. By comparison, the BRICs (Brazil, Russia, India and China) grew slower and sluggish—for example, around 4% on the Shanghai index and -2% on Brazil’s Bovespa.

A set of well-known factors bind these seemingly random countries. Solid debt and deficit dynamics; attractive labor trends, favorable demographics and upward mobility; and important productivity gains all make for a compelling economic growth story. However, there are two areas where perceptions of frontier economies are really changing: risk and liquidity.

In regards to risk, investors are beginning to better understand the significant benefits of delineating between risk, measurable and possible to calculate, and uncertainty, which is not. Like anywhere else, investors who can tap into on-the-ground networks and relationships have an advantage with risk management. But thankfully meaningful, the task of risk assessment has gotten easier with increases in transparency around economic and political information, data flows and widely available regulations over jurisdictions. The transition to western-styled democracy and fully transparent and liquid capital markets will be bumpy, but the uncertainty arising from these growing pains should be viewed in the context of an upwardly sloping trend line of progress which will almost certainly occur over a relatively short time line.

Correlations between frontier and developed stock market returns are around 0.75, compared to roughly 0.90 between developed and emerging economies such as the BRICs. Country risk premiums are close to those of the broader emerging markets. With proper risk management tools, this implies that investors can garner significant diversification benefits. The lower correlation between frontier and developed markets points to risk factors that are orthogonal to the global risk-on, risk-off theme that has captivated markets over the past five years. Frontier markets provide opportunities to step away from the global macroeconomic themes and focus on the micro stories on the ground, thus providing a better environment to identify unique investment opportunities. Smart investors are looking for great opportunities that are driven by company-specific issues from which they can analyze and profit.

In terms of liquidity, both equity and debt markets – international and local – have grown considerably over the last five years. Today, with a market cap of more than $1 trillion, the universe of stock markets boasts more than 8,000 listings across broad sectors with notable risk/reward profiles in financials such as banking and insurance, consumer goods, and telecommunications companies. A number of commentators erroneously believe investing in frontier markets is simply expressing a commodity trade. To assume this would be miss out on some of the more significant opportunities in these burgeoning markets such as in the logistics and telecommunication sectors. Moreover, to put a finer point on this, today Africa has almost 20 stock exchanges, with just over a thousand listed equities; more than 85% of these stocks are non-commodity related businesses....
Riaz Haq said…
Here's a Daily Times on Al-Tuwariqi steel reaching full production:

* Plant runs at 100 percent of its rated capacity within 4 months of its launch

KARACHI: Tuwairqi Steel Mills Limited (TSML), Pakistan’s first private sector integrated environment-friendly steel manufacturing complex and a joint venture of Al-Tuwairqi Holding (ATH)/ISPC of the Kingdom of Saudi Arabia and the world’s third largest steel maker POSCO has recorded the ever highest production of an iron making plant in Pakistan during the Plant Demonstration Test (PDT) conducted in the expert supervision of MIDREX, USA.
During the PDT, the plant ran at 100 percent of its rated capacity i.e producing 160 tonnes of high quality Direct Reduced Iron (DRI) per hour for 72 hours achieving all of its operational targets. This development comes at a crucial juncture when Pakistan’s current per capita steel consumption is only 40 kilogram, which is exuberantly low, when compared with the global average of 215 kilogram. This establishes a dire need and increased emphasis on achieving international benchmarks to become a modern and an efficient economy.
Dr Asif Brohi President National Bank of Pakistan congratulated the entire team of Tuwairqi Steel Mills on achieving this milestone and appreciated their enthusiasm and technical expertise.
It is heartening to observe TSML has already increased the production capacity of Pakistan by 1.28 million tonnes per annum, which would help meet the ever growing demands of steel in Pakistan and with its massive expansion and modernization plans, Al-Tuwairqi is poised to transform the country into an industrial hub, he added.
Zaigham Adil Rizvi Director (Projects) TSML said, “We are committed to our vision to participate in the development of national economy in order to have a long sustaining growth of Pakistan.”
During the PDT, Chang Hee Lee Council General of South Korea, Rahat Kamal DMD SSGC, Major General Javed (r) Chairman Pakistan Steel Mills; Zubair Motiwalla Chairman Sindh Board of Investment, Waqar Ahmed Hashmi DMD KW&SB and Ghulam Rasool Shiekh from EPZA were also present.
Al-Tuwairqi kicked off the commercial production of TSML’s 1st phase in January this year-a Direct Reduction of Iron (DRI) making plant with the capacity to produce up to 1.28 million tonnes per annum of high quality DRI, which is evidently steel’s most versatile metallic and a preferred raw material for quality steel making worldwide.
Riaz Haq said…
Here's Express Tribune on Bahria Town projects in Karachi and Rawalpindi:

RAWALPINDI: Pakistan’s largest real estate company, Bahria Town (BT) on Sunday started the booking process for its residential plots in Karachi and Rawalpindi.
Under the project, the real estate giant will allot plots to more than 0.5 million people. On the first day of booking, more than 50 thousand people received the form against a fee of Rs1,000.
The demand was such that some people reportedly resold their forms at a profit.
People from all walks of life showed great interest in the BT project and long queues of citizens were seen at the booking offices till late at night.
Talking to Express News, people said even the VIPs were found standing in queues, and the credit for this went to the founder and chairman of Bahria Town, Malik Riaz Hussain.
The BT representative said Sunday was reserved for the distribution of forms for residential plots. “The booking forms for commercial plots will to be offered on Monday (today),” he added.
Riaz Haq said…
The first ten months of this fiscal year have witnessed 21.3 million tonnes of cement industry dispatches in local market, showing a growth of 2.7 per cent as compared to same period last year. The overall situation during the period showed a growth of 1.17 per cent as compared to the same period of the last fiscal year, as total dispatches increased to 27.986 million tonnes against 27.664 million tonnes from July 2012 to April 2013.
Riaz Haq said…
Local sales of the cement industry posted a growth of 9.85% during the first quarter of the current fiscal year, compared with the same period previous year.
Exports, however, recorded a decline by 8.13% compared with exports during the first quarter previous year.
The overall situation during the first quarter of the current fiscal year showed a 4.68% growth compared to the same period last year. Cement dispatches to domestic markets during September 2014 were 2.42 million tons compared with 2.12 million during the same month last year, depicting an increase of 13.86%.
Exports during September 2014 were 730,000 tons against 816,000 tons during September 2013, showing a decline of 10.6%. Total dispatches during September 2014 were 3.15 million tons compared to 2.94 million tons during the same month last year.

According to the All Pakistan Cement Manufacturers Asso­ciation (APCMA), the industry has been struggling against the high duty structure, impractical imposition of maximum retail price (MRP), increasing import duties on coal, increasing power tariffs and axel load restrictions.
Additionally, an added issue for the industry is the growing trend of smuggling from Iran.
Domestic cement uptake in the southern region is being seriously affected due to unregulated smuggling of cement from Iran. Statistics showed that against a 10.8% increase in domestic sales in the northern region, domestic sales in the southern region showed an increase of only 5.4%.
Riaz Haq said…
Pakistan is a country is identified as one of the rapidly emerging markets, which is further reaffirmed by the fact that Pakistan has the 27th largest purchasing power parity in the world. It is also the 15th largest trader of goods and seventh largest trader of services.

The Ministry of Finance in Pakistan conducts an annual economic survey, and according to the survey for the year 2012 – 2013, the ‘manufacturing sector accounts for 13.2% of Gross Domestic Product (GDP) and 13.8% of the total employed labour force. Large Scale Manufacturing (LSM), at 10.6% of GDP, dominates the overall sector, accounting for 81% of the sectoral share.’ The manufacturing industry is considered to be the backbone of economic prosperity for any country and, therefore, growth of the sector itself is very important.

Pakistan’s cement industry – yesterday

With the industry facing its own share of ups and downs, the history of the cement sector in Pakistan has been an eventful one. The industry, which started with only four plants and a production capacity of 0.5 million t, now boasts 24 integrated facilities and an installed production capacity of 44.64 million t.

During the 1950s, five cement plants were set up with a combined capacity of 2.8 million t. This number soared to 14 operational plants by the end of 1969. However, setbacks such as the nationalisation of state-owned plants, to form the State Cement Corporation of Pakistan following the Economic Reforms Era in 1972, hampered growth.

Nevertheless, policy changes in the late 1980s and ever increasing demand for housing encouraged the private sector to step forward. Seven more plants were set up with a combined capacity of 2.54 million t. The public sector also invested in four new cement grinding units, thereby increasing the total production capacity. However, it was not until the year 2000 that the country’s cement industry began to experience rapid expansion, with production capacity increasing from 16 million t to over 44 million t today.

Pakistan’s cement industry – today

At present, the cement industry directly and indirectly employs over 150 000 people and supports a host of subsectors, including the construction, shipping, packaging and logistic industries. The industry contributes handsomely to the national exchequer in the form of duties and taxes, and is bringing in foreign reserves through exports.

In the first nine months of FY14, the cement sector exported 6.017 million t of cement and clinker. The domestic cement market is divided into two large clusters, namely the North and the South regions, which absorb a large portion of local production. The remaining portion is exported to countries such as Afghanistan, South Africa, Iraq, India, Sri Lanka, Tanzania, Djibouti, Mozambique, Sudan and Kenya, among many others.------
Pakistan is one of the top 20 producers and the eighth leading exporter of cement in the world. With the global cement market constantly expanding, there is a huge opportunity for Pakistani cement manufacturers to export their products to the Middle East, Africa and developing countries in other regions.

Lucky Cement has recently started operations in Iraq in an effort to meet the immense demand in the country as it rebuilds its infrastructure. The plant, Al Mabrooka Cement, is a joint venture grinding unit located near the port in Basrah. The company is now set to start operations in DR Congo in 2016 in another joint venture cement plant, Nyumba Ya Akiba.

Additionally, Gwadar, a planned free trade port city on the Arabian Sea coastline of Pakistan in the Balochistan province, is expected to help increase exports due to its strategic location and close proximity to the Gulf countries. Even within the country, the industry can greatly contribute to the government’s plan to upgrade infrastructure, constructing dams and providing housing to the poor.
Riaz Haq said…
Pakistani cement sales volumes up almost 9% in first 4 months

In Pakistan, cement sales have reportedly grown 8.87% in the first four months of the current fiscal year, reaching more than 8 million t. Customs Today reports that overall exports decreased y/y to 2.79 million t, a 4.43% drop.

There is something of a north/south divide in sales, with the northern region seeing a 10.4% gain in domestic sales but a 12.3% drop in exports, while southern cement producers reported a much smaller increase in domestic sales but a 12.5% increase in exports.

The All Pakistan Cement Manufacturers Association has reportedly claimed that government inaction has impeded industry growth. Fuel and power cost increases have put pressure on companies’ margins, as shown in the quarterly results reported last month. Increased taxes were also reported as an issue affecting the companies’ bottom lines.
Riaz Haq said…
FOR the calendar year 2014, the cement sector, with a market capitalisation of Rs295bn, provided a 70pc return to equity investors — far more than the benchmark KSE-100 index’s return of 27pc.

It marked the third consecutive year where the sector outperformed the broader market. Among cement companies, Kohat Cement Company (KOHC) provided the third-highest return of 97pc, after Pioneer Cement’s 135pc and Lafarge Pakistan’s 134pc.

Nabeel Khursheed, an analyst at Topline Securities, attributed Kohat’s performance to ‘improved production efficiency and swift deleveraging’.

Aizaz Mansoor Sheikh, the company’s CEO, told shareholders that KOHC’s pre-tax profit had grown 20pc to Rs4.38bn in FY14, from Rs3.77bn in the previous year. “Stable coal prices, better cement rates in the local market and growth in dispatch volumes contributed towards improved profitability,” he said.

And Kohat Cement is looking forward to the installation of a 15MW waste heat recovery plant (WHRPP), which is expected to mitigate the rising electricity costs. “The WHRPP is currently under construction, with a projected completion date of June 30, 2015,” the CEO said.

Despite all that, sounds reverberated in the market of spanners being thrown in the works of KOHC. Most sector analysts delivered the bad news of mine owners moving a petition in local courts against the company for non-payment of their dues, which was said to have led to a ban on excavation of essential minerals by the company.

However, the investor panic subsided on Friday afternoon following a clarification by KOHC’s company secretary, Khurram Shahzad, who said in a filing with the stock exchange that “the company has valid leasing rights from the KP government for the excavation of minerals from the leasehold land against payment of royalty and excise duty to the government…. At the present point in time, no stay orders are in the field debarring the company to exercise its valid and legal rights for the excavation of the materials”.

And the company assured investors: “The management is expecting cement dispatches [to] resume at their desirable level from next week”.

Waqar Uddin Salim, an analyst at Summit Capital, anticipates KOHC’s profitability to rise to Rs3.75bn in FY15. The industry’s dynamics remain healthy, with the Topline analyst anticipating cement sales to grow 6.8pc annually in the next three years to reach 21.8m.tonnes by FY17 and exports to rise to 7.9m tonnes per annum. The industry’s capacity utilisation is expected to mount to 89pc.

Meanwhile, Kohat has witnessed a big deleveraging in its balance sheet, with the ratio of long-term debt to total assets dropping to just 1pc in FY14, from a tall 35pc in FY10, and has room to increase capacity utilisation.
Riaz Haq said…
With over 6% growth in sales in the first seven months of the current fiscal year, analysts say the cement industry is set to post highest-ever growth rate in the last five years.
This growth is more important for the cement industry officials as it is mainly based on local sales unlike the pre-2010 period when the industry used to equally rely on exports.
“Cement industry’s domestic sales have surprised everyone and the growth has surpassed all market estimates. Industry is likely to grow over 6% as it has risen in the first seven months (Jul-Jan 2014-15),” industry analyst Saad Hashmi commented.
Average growth in cement production was just 2.9% in the last three years. However, cement sales have shown an exceptional 6.2% growth in the first seven months in fiscal year 2015. Even if the industry succeeds in maintaining the current growth at the end of the fiscal year, it will be the highest expansion rate in the last five years.
Cement production posted the highest-ever number of 34.28 million tons in the last fiscal year 2013-14. Dispatches increased to 20.02 million tons during the first seven months of 2014-15 compared to 18.86 million tons in the same period of previous fiscal year. This means the industry can touch 36.6 million tons by the end of June 2015 if it grows at the current pace of 6.2%.
In all likelihood, Hashmi said the cement industry will succeed in maintaining 6% growth because the remaining five months (February to June) are all those in which the construction activity remains high.
Owing to the continuous decline in cement exports over the last five years, the industry is increasingly dependent on local sales. The impact of the rise in domestic consumption is so strong that while issuing the latest data, the spokesperson for the All Pakistan Cement Manufacturers Association recently claimed, “higher cement uptake depicts a turnaround in the economy.”
Commenting on the ‘immense satisfaction’ of the industry from rising domestic demand, he said cement companies have been reaping the benefits of record low international coal prices that have significantly reduced the cost of production.
Construction sector
Association of Builders and Developers Pakistan (ABAD) former senior vice chairman Saleem Kassim Patel told The Express Tribune that the private sector is showing a strong growth, which is one of the main causes of high cement consumption in the country.
“There is a huge backlog of houses, which is why this sector will continue to attract investments. What is more important is that the current rise in construction activities can turn around the economy if the government starts supporting it,” said Patel.
However, one of the biggest hurdles to the fast growth of the construction sector is the moratorium on new gas connections for high-rise buildings. Without gas, thousands of already constructed residential buildings are still unoccupied, causing financial losses of millions of rupees to the builders and their clients, he added.
Owing to the growing shortage of gas, the PPP-led previous government banned all new gas connections to CNG stations, high-rise buildings and industries in 2011. Since then, builders and developers say the ban has been proving damaging for new investments in this sector.
Riaz Haq said…
Cement Makers See China-Led Bonanza as Pakistan Spends Billions
by Faseeh Mangi , Kamran Haider , and Khalid Qayum
June 1, 2017, 2:30 PM PDT

Nation’s cement output to rise by half as most firms expand
China is financing more than $50 billion of Pakistan projects
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 national 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.”
Riaz Haq said…
#Pakistan #cement production has grown from 35 million metric tons in 2015 to 55 million metric tons in 2021. #CPEC #NayaPakistan #housing #infrastructure #construction #exports

Update on Pakistan, March 2022 - Cement industry news from Global Cement

(Graph in the article shows Pakistan cement production growth from 35 million tons in 2015 to 55 million tons in 2021)

Data from the All Pakistan Cement Manufacturers Association (APCMA) shows that cement despatches have been steadily growing since the mid-2010s with a blip in 2020 caused by the start of the Covid-19 pandemic. The upward trend has been driven by local sales. Exports have generally grown at the same time, with more variance, but they are yet to regain the high of nearly 11Mt reported in 2009. On a rolling annual basis, local sales have remained steady since mid-2021 but exports have been slowly falling. In April 2021 they were 9.17Mt but by February 2022 they were 7.33Mt. For the February 2022 figures APCMA blamed this on the growing cost of production, rising international freight rates, mounting coal prices and a trade ban with India. On that last point for example, Pakistan-based producers exported 1.21Mt of cement to India in the 2017 – 2018 financial year before exports stopped after February 2019. Despite a brief respite in the spring of 2021 talks are still ongoing to resume trade with India.

On the corporate side the country’s largest cement producer by capacity, Lucky Cement, drew the same conclusion as the APCMA with its half-year results to 31 December 2021. Its local sales volumes were down a little but its exports were down a lot. It noted that the reason its local sales were falling but national industry local sales were up slightly was due to some competitor plants being non-operational in the previous year. However, the company managed to keep sales revenue and earnings increasing year-on-year by successfully combating growing input costs with price rises. Bestway Cement, the country’s other large producer, reported a tougher situation in the second half of 2021, with both local sales and export volumes down. This was attributed to a boom in construction activity in the second half of 2020 as Covid-19 lockdowns were eased. Demand for cement since then was said to be ‘sluggish’ due to inflation and high commodity prices. It also pinned its marked fall in exports on political and economic instability in Afghanistan. However, turnover and operating profit were both up due to higher selling prices.

Elsewhere in the sector news since the start of 2021, Pakistan’s exports to South Africa remained stymied in early 2020 due to a review of ongoing tariffs and the government decision to restrict infrastructure projects to only using locally produced cement. On the sustainability front the APCMA started to set out its decarbonisation strategy in November 2021. It may have a long way to go given that a think tank reported earlier in the year that the cement sector was the largest emitter of coal-related CO2 emissions in the country, even more than power generation. Alongside this plenty of capacity additions have been announced. Lucky Cement started commercial cement production at its 1.2Mt/yr integrated Samawah cement plant in March 2021. Various new cement plants and upgrades to existing plants have been proposed by Bestway Cement, Cherat Cement, Fauji Cement, Kohat Cement Company, Lucky Cement and Maple Leaf Cement. Finally of note to a sector troubled by energy prices, in September 2021 the Pakistan International Bulk Terminal said it was going to upgrade its coal handling capacity to around 17Mt/yr by 2024.

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