KARACHI: The money minting cement sector seems to be in the eye of the storm as two significant upcoming events have the potential of breaking the price and production arrangement among cement makers (cartel) right through the centre.

Some reports suggest that cement makers are to meet on April 10, under the umbrella of the powerful lobby, the All Pakistan Cement Manufacturers’ Association (Apcma), to discuss and stave off the threat.

The first relates to the acquisition of Lafarge Pakistan Cement (LPCL) by a bigger player. On April 4, Lafarge had said in a filing with the stock exchanges that Sofimo SAS – a fully-held direct subsidiary of Lafarge SA and holding company for the main subsidiaries of the Lafarge Group, as indirect holder of 75.86 per cent shares in Lafarge Pakistan was evaluating a potential divestment of its shares in LPCL.

“We have been informed that currently, SAS has not entered into any binding agreement or arrangement for the divestment of its shares in LPCL”, it maintained.

Though it has intensified activity in the Lafarge stock which on Monday was the volume leader at the KSE with trading in 33 million shares, many market strategists also brush off an imminent change of hands.

“The rumour has been doing the rounds for the last six months and nothing has happened,” said one broker.

However after the international merger of Lafarge — one of the biggest cement producers in the world — with another global giant last week, the earlier thoughts of status quo are shrouded in uncertainty.

The announcement by DGKC to go ahead with its expansion plans of 2.6m tonne cement plant in the Hub region to gain exposure to the relatively safer southern region, has also ruffled feathers.

The expansion poses a significant threat to the positive industry fundamentals of South where most plants are operating at 90pc capacity.

The plants in the North are eyeing the prosperity of the South with greed and envy. In spite of a looming threat of price war, the DGKC has taken a plunge into expansion.

It is not likely to go very well mainly with the sector giant, Lucky. The anticipated addition of 2.6m tonnes would increase the southern region’s capacity by 34pc to 10.2m tonnes, a move likely to dim the bottom lines of existing Southern players.

Although DGKC’s planned expansion facility will likely become operational after three years, Lucky has already vowed to increase its production capacity if DGKC goes through with its plans.

“Since Lucky already has an idle 1.25m tonne plant in the South, the company will be able to begin production much sooner than DGKC. The southern region’s players, however, may feel the threat of their operating rates to come under pressure in the near term,” said an analyst.