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Infrastructure projects help boost country’s cement industry

Local cement manufacturers met 85 per cent of the demand while foreign companies delivered the rest last year

FE Report | February 25, 2019 00:00:00

Rapid urbanisation and large government infrastructure projects are helping boost the country's cement industry, as the sector has geared up to Tk 290 billion in terms of annual turnover.

The cement industry has been growing by more than 10 per cent year-on-year for last one decade.

However, the sector achieved a robust growth of 12 per cent in the last calendar year as the quantity of sale of construction materials was a record 33 million tonnes, according to the Bangladesh Cement Manufacturers' Association (BCMA).

Currently, 75 cement manufacturing companies, produce around 33 million tonnes of cement annually against their actual capacity of 54 million tonnes.

Local companies hold more than 85 per cent of market share thanks to attractive prices and quality, BCMA data showed.

"Despite the manufacturers facing many challenges, the sector has been showing notable growth for last one decade," Mohammed Amirul Haque, managing director of Premier Cement, said.

He credited the increasing demand from individual homebuilders, mega projects, and rebounding real estate, for the growth.

"The recent growth of the cement industry is also being driven by the rural economy, which is developing and will expand further," he said.

He said people in the rural area are now building homes using bricks instead of CI sheets.

"Schools, colleges and other structures are being built across the country and the government's consumption has also seen substantial growth," he said.

But the sector has been passing through many challenges following rise in costs of raw materials including clinker, gypsum and slag.

Depreciation of Taka against the US Dollar has also been compounding woes of the local players, he said.

The taka devalued from Tk 78 per US dollar in 2017 to Tk 84 now.

Masud Khan, chief executive officer of Crown Cement Group, said higher per capita incomes have resulted in greater affordability while changing lifestyles have resulted in more nuclear families.

"These factors also have contributed to consistent rise in the demand for construction materials such as cement," he said.

He pointed out that large government infrastructure projects have sustained the growth in cement demand amid a slow real estate recovery.

Managing director of Metrocem Cement Ltd Md Shahidullah, said leading cement grinders have been raising capacity for last three years leading to an excess crushing capacity compared to demand.

This trend is making competition in the market tough, resulting in decline in prices.

Raw material prices increased in the last one year sharply by 8.0 to 10 per cent as clinker price skyrocketed to US$ 44-$ 45 a tonne, said Shahidullah.

Transport cost has also seen a sharp increase due to the weight (axle load) restriction imposed by the government on highways.

But the manufactures did not raise prices of the material, he said.

Cement of different brands are being retailed at Tk 400 to Tk 450 a sack (50 kgs) in the country for the last fourteen months, Mustafizur Rahman Pintu, proprietor of Sardar Traders at Manirampur, in Jashore, told the FE.

"But there is a twist in wholesale prices," he said.

"Companies offer Tk 365 to Tk 390 for per sack to the traders to keep a hold the market", he added.

Senior vice president of the BCMA Manwar Hossain, said the industry used to produce only ordinary Portland cement using 95 to 96 per cent of clinker two decades back.

And subsequently composite cement emerged, adding components like fly ash, slag and limestone, he said.

"We are producing verities of high-quality cement now. Besides, producers are bringing in modern technology, making the manufacturing process more efficient," he said.

He said we relied heavily on imports for cements some twenty years back.

"But now we are self-sufficient and looking to seize a sizable global market share," he said.

Mr Hossain, also Group Managing Director of Anwar Group of Industries (AGI), said production of the local companies has surpassed that of real demand forcing market players into a price war.

For such condition, many companies could not even make profits last year.

He expected that the current business trend will continue in the next two to three years "as consumption will not double overnight."

"So mill owners have to increase efficiency and productivity in all areas," he said.

However, local companies are now producing high quality products competing with multinational companies.

According to the BCMA, local companies met 85 per cent of the demand while foreign companies delivered the rest last year.

Mostafa Kamal, President of BCMA said the country has been able to sustain its GDP growth within 7.0 per cent for last few years.

He said rising population, low labour cost, rapid urbanisation, fast industrialisation and mega projects might continue supporting the country's growth which is also expected to remain so in the upcoming years.

The country's strategic geographic location has led to increasing levels of infrastructure investments from China, India and Japan.

He pointed out that this positive outlook is also leading to significant investments in the country's cement production capacity expansion which may result in continued price pressure in the market.

However, Mr Kamal, also Chairman of Meghna Group, which markets Fresh Cement, echoed weight (axle load) restriction set by the government as a problem for the sector.

He said a single truck can now carry highest 240 sacks of cement, down from 500 sacks previously because of the load restriction, which has increased both demand for vehicles and carrying costs.

He said the government should make the river route smoother to take uninterrupted movement of raw materials and finished products away from the roads.

It will help the industry expand business further, he said.

However, the country is almost dependent on cement raw materials like clinker.

It imports 15 to 17 million tonnes of clinker worth US $ 650-$ 750 mainly from Vietnam and Iran.

Only two local two companies -- the state-run Chhatak Cement and private company LafargeHolcim have their own clinker plants.

However, local companies are now exporting cement.

Crown Cement, LafargeHolcim, Premier Cement, Seven Circle Cement, Tiger Cement, Confidence Cement, Aramit Cement, UltraTech Cement, Fresh Cement and other companies are now exporting their products to several countries.

According to the Export Promotion Bureau (EPB), cement exporters made shipment worth $12 million in the last fiscal year (FY' 18).

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