DG Khan Cement Company Ltd (DGKC) Monday signed a contract with FLSmidth, Danish Financial Supervisory Authority, to supply engineering equipment for another cement manufacturing plant of 8,500 tonnes per day (2.55 million tones per annum) at an estimated cost of Rs 6.4 billion.
The new cement plant will expand the company’s current capacity from 4.2 million tones to 6.75 million tones per annum. The plant will be located at Mouza Chihai, District Lasbella, Balochistan (South Region).
DG Khan Cement Company Ltd is a major cement producer in Pakistan and part of the Nishat Group which is one of the largest conglomerates in the country. The first contract between DG Khan Cement Company Ltd and FLSmidth dates back to 1992 and since then the partnership has resulted in additional three orders to FLSmidth in 1998, 2005 and 2007.
“Pakistan is a very important market for FLSmidth and we are extremely pleased that DG Khan Cement Company Ltd has again chosen FLSmidth as their supplier. This underlines our valuable long-term ties with DG Khan Cement Company Ltd as well as our strong foothold in Pakistan where we expect to see more activity following new government development programs,” says president of the Cement Division Per Mejnert Kristensen of FLSmidth.
The experts said plant expansion is expected to come online in 30-36 months and the new manufacturing line would require approximately 38 MW electricity, however, the company had already hedged its power requirement through signing a contract with K-Electric for the supply of 40 MW power explicitly for its new plant in April 2015.
The new plant will fill rising demand of cement in the country, especially in Balochistan, the analyst said. “We don’t see any risk of price war ahead owing to remarkable dispatches growth (7.9 percent year on year) which will likely to continue in later years due to materialization of China Pakistan Economic Corridor (CPEC). The government’s focus on infrastructural development and demand thrust from private construction activities (current housing backlog stands at 9 million units housing units) will create the cement demand in the country.”
The company has informed the Karachi Stock Exchange (KSE) that “the agreement of supplying engineering equipment with FLSmidth will help DGKC to enhance its production capacity of 8,500 tones per day (2.5 million tones per day) at Hub Balochistan.”
The latest development in DGKC’s move into the South is expected to create some price turbulence for the sector as rumors and threats of predatory pricing are out of proportion – providing a good opportunity for value hunters to accumulate, the analyst said.
