KARACHI, July 13 Whether they like it or not smaller cement companies can scarcely avoid being swallowed up by the big fish. That eventually would empower the bigger ones, Lucky, D.G., Maple Leaf and a few others to set the direction for the industry.

“Several small cement plants are surreptitiously offering themselves for buyout,” says a cement producer, but he adds that they are putting up hefty price tags. The industry crocodiles that are eyeing them would wait until the next summer, when in a shrinking pond, most cement plants with less than one million tons capacity would find themselves difficult to swim.

Analyst Syed Abid Ali, who follows the cement sector for Taurus Securities, identified two factors that could accelerate acquisitions in the sector. Firstly, Fauji Cement's 7,200 tons per day capacity expansion project to be launched next year, which would increase industry's overall production capacity. Secondly, a possible decline in exports, which together could spark a price war.

In such a situation, the rule of survival of the fittest would follow. Bigger companies are already endeavouring to take various steps to cut down costs in order to promote 'economy of scale'.

In their latest report to the shareholders for the third quarter ended March 31, directors of D.G. Khan Cement mention “World's largest vertical cement grinding mill has started its commercial production at DGK site which will bring substantial savings in energy as well as maintenance cost compared with conventional ball cement grinding”. Analysts said that it was a step to achieve economy of scale.

The project would enable more grinding of clinker in shorter time, thereby reducing cost per ton of production.

Industry rivals, both in the Northern and Southern zones, who have fought pitched battles on other grounds also, such as to be the biggest cement producers, are drawing up their own strategies to counter the as yet distant cut-throat competition.