LUCK’s commissioning of new plant to shake cement price mechanism

December 30, 2019 (MLN): As the Lucky Cement (LUCK) has announced its successful completion of construction and installation of its new 2.8 million tons per annum Brownfield plant in Pezu (North) KPK, this has brought a risk of rise in cement prices in northern market which is already going through a rough patch due to expansionary cycle and subdued demand.

Foundation Securities in its research report highlighted that KPK is a lower demand province and the inclusion of 2.8 million tons capacity of LUCK and an additional 2.3 million tons of another player in near term would shake the cement price mechanism in KPK/ Punjab region.

As per the report, this expansion will upgrade LUCK’s cement capacity to 12.15mn tons per annum from existing 9.35mn tons per annum in both north/south markets.

The expansion will also increase its capacity-based market share to 17.4%, which will make it the largest domestic cement player in Pakistan. In northern region, LUCK would have 12.9% share while, in Southern region it would have 32.4% share, showing that it will remain the second largest player in northern region, the report revealed.

If the price of cement increases in near future, the margins would remain contracted for all major players in the north during 2HFY20, the report added.

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