INTERVIEW: Global clinker shortage drives export growth for Pakistan cement industry: exporter

Pakistan is emerging as a key player in the international cement and clinker trade, with cement exports during the first 10 months of fiscal year 2024-25 (July-April) rising 24% year-over-year, according to Pakistan's Bureau of Statistics. Platts, part of S&P Global Energy, recently interviewed Farid Fazal, executive director of DG Cement Company, one of the country's largest cement producers, to discuss the Pakistan cement industry and its export outlook.

What is the outlook for the Pakistan cement industry, considering its current overcapacity, utilization rates, and export opportunities?

If you look at the Pakistan cement industry, we have a huge overcapacity. In the fiscal year 2013-14, the installed capacity of the industry was 45 million mt. The local consumption was around 59%, and exports were 18%, making a utilization of 77%. This was a good capacity utilization. After that, all the owners started adding capacity, and in 10 years, the installed capacity jumped to 84 million mt while domestic consumption dropped to 46% and along with exports, utilization reached a low of 54%. Now, we have a huge surplus and therefore all producers are out in the market to export.

In fiscal year 2023-24, we managed to achieve a utilization rate of 71%, but in the first 10 months of the current fiscal year, utilization has dropped to 53%. We expect the full year to end at around 60%. Since January, however, we've had a "God-sent opportunity" with the global clinker shortage, which allowed us to take advantage of rising demand.

Until 2024, we were selling clinker at $28/mt, which was even lower than our variable costs, just to keep our factories running. But this year, the shortage in the international market changed everything. Everyone wanted clinker, and customers were eager to secure quantities, which drove prices up. At the peak demand period in May, we sold clinker at $38-$39/mt FOB and cement at $46/mt FOB, compared to $40/mt FOB in 2024. We did quote $40/mt FOB for clinker and $50/mt FOB for cement, but those deals didn't go through. Still, we can't complain because this shortage has been a huge opportunity for us.

Looking ahead, I think prices will stabilize at these levels. They won't go higher, but there's a chance they could go lower.

How has Pakistan's cement and clinker export trajectory evolved?

We've been exporting cement and clinker since 2002, but the volumes were much smaller back then, mostly to neighboring countries like Bangladesh, Africa, Sri Lanka and even India.

About four years ago, I was in Houston and met some old colleagues who were looking for cement supplies. They asked me to bring cement from Pakistan to the US, and that's when we started working on it. The first step was getting approval from the Texas Department of Transportation, which took a whole year. Once we had that, we began exporting cement to the US. Now, we regularly supply to the US and have approvals from five states: Texas, Louisiana, North Carolina, South Carolina and Florida.

At the moment, we're shipping about 1.5 consignments every month to the US, which is roughly 75,000 mt. By the end of the year, we expect this volume to double because we're seeing a surge in inquiries. Of course, Turkey is a big competitor for us. They have a huge advantage because they're closer to the US, which means lower freight costs. Plus, they entered the market earlier, so they can secure higher FOB prices.

We're also getting inquiries from Europe. Environmental regulations there have made it difficult to set up new plants, and that's where we come in. We're CBAM-compliant and EU-approved, and we can produce low-chromium cement. We've already sent small quantities to Europe in containers for testing, and I'm hopeful that we'll have a breakthrough in that market within the next three to six months.

What are the challenges related to tariffs on exports?

Initially, we were hit with a 29% tariff on exports to the US, which was later reduced to 10% for three months. One of our regular customers asked us to reduce our rates to help share the cost of the tariff. Otherwise, they would have had to increase their prices, which could have hurt business. To maintain goodwill, we reduced our contract price by $1/mt FOB.

Right now, we're in talks with the US government, and I'm very hopeful that we'll end up with only a minimum tariff.