China-Pakistan Economic Corridor (CPEC) is around 3,000 km long trade route from Pakistan’s Gwadar Port to Kashgar city in northwestern China’s Xinjiang Uygur autonomous region. The route is comprised of a raft of mega construction and infrastructure projects set to be completed by 2030. The Chinese government promised to finance CPEC with $46 billion investment, out of which around $11 billion is estimated to being spent on building roads and railways infrastructure, while the remaining $35 billion would be poured in energy projects.
CPEC is a part of China’s ‘One Belt, One Road’ initiative. Once fully completed, the route will provide China with rapid access to the Middle Eastern, African and Central Asian markets. On 13th November 2016, CPEC became partly operational when a Chinese cargo was transported overland for onward maritime shipment to various parts of the world.
Commodity Inside Asia Analyst Muryum Jamil writes “The planned projects will underpin the construction and infrastructure market in Pakistan, and ultimately increase demand for building materials such as steel, cement and wood.” Indeed, China will finance most of the mega projects in various lending forms, though Pakistan needs to repay the money with over $30 billion in interest over the next 30 years.
Given the electricity issues, energy is a key part of the CPEC. The work on Port Qasim Electric Power Company (Private) Limited in Sindh started in 2015, and so far 65% of the plant and 70% of the Jetty has now been completed. The plant is planned to start its commercial production by 2018. Another major power-related project is Gwadar Coal-fired Power Project, where works on the project are expected to commence in the first half of 2017. Kohala Hydel Project is also at its feasibility stage and is projected to start operating by 2023 with the estimated cost of $2.4 billion.
Moreover, a number of other power-related projects are lined up including Port Qasim Power Plant, Thar Power Plant, HUBCO Coal Project and Sahiwal Power Plant. The other main planned infrastructure projects include New Gwadar International Airport, Development of Free Zone, Orange Line – Lahore and Gwadar Smart Port City Master Plan. There is also a plan to build an oil pipeline for supplying crude oil from Gwadar, Pakistan to China.
CPEC is also attracting domestic investors to invest in construction related industries such as steel, cement, electric cable and glass. Nishat Group is setting up a cement plant in Balochistan to satisfy the growing demand for cement. Younus Brothers, the owner of Lucky Cement, is building a new cement plant in Punjab, as well as establishing a coal power plant in Karachi. A steel mill in Karachi, which also supplies steel to the Lahore Orange Line Metro Train project, is also planning to expand its production capacity. Fast Cables, which produces electric cables, has expanded its manufacturing facility to meet the future demand of CPEC-linked projects and is planning to advance it further. We expect that there will be further small steel rolling mills for longs steel around the CPEC route.