Cement makers eye a turnaround

Cement makers, who have been going through a tough time for the last two years, now expect the demand to return next year, riding on some big infrastructure projects.

The market is likely to grow 20-25 percent over the next five years, according to industry insiders. The sector grew 11 percent in 2013-14, down from its peak of 31 percent in 2009-10. The growth rate dropped to a single digit in 2014-15.

Political turmoil that ate up the first quarter of 2015 had hit the cement industry hard. A bad time for the real estate sector also affected the cement makers.

Three-fourth of the cement produced in the country is consumed in Dhaka and Chittagong, said market players.

“We are optimistic that our capacity will be fully utilised soon,” said Mostafa Kamal, chairman of Meghna Group that manufactures the Fresh brand cement.

The total capacity of the cement factories in Bangladesh stands at around 35 million tonnes a year, but the current demand is only half the capacity.

Optimism among the cement makers stems from the start of construction of several big infrastructure projects, including the Padma bridge that will create a direct road link between 19 districts of the southwest region and Dhaka. They hope completion of the project by 2018 will generate new demand in the southern and western districts.

The elevated expressway, metro rail, several flyovers, a tunnel in Chittagong and seaports will boost demand for cement, they added.

 “I believe the business will turn around next year,” said Md Shahidullah, managing director of Metrocem Cement.

Political unrest in 2013 and 2015 affected growth of the industry; sluggish demand pushed down cement prices to Tk 400-Tk 420 per 50-kilograms (kg) this year from Tk 480-Tk 500 in 2013, he added.

“The demand for cement in the southwestern districts will increase significantly once the construction of the Padma bridge is completed.”

Bangladesh is one of the lowest consumers of cement in the world with its per capita consumption being 105 kg, while it is 217 kg in India, 265 kg in Pakistan and 310 kg in Sri Lanka. The per capita cement consumption is 705 kg in South Korea and 1,700 kg in China. 

Shankar Roy, general manager of Holcim Bangladesh, said the industry has become saturated as the production capacity is double the market demand.

“Apart from political unrest, sluggish business in the real estate sector hit demand for cement this year,” Roy said.

He expects the market would grow by 4-5 percent in 2015, but the demand will rise next year.

Bangladesh used to meet its demand for cement till 1995 through imports. After that, local entrepreneurs started setting up factories and over 100 factories were incorporated as cement manufacturers till 2010.

Currently, only 32 factories are in operation, including five multinational companies. Many small factories were shut down amid fierce competition.

Four leading global cement producers -- Lafarge, Holcim, Cemex and Heidelberg Cement -- also have operations in Bangladesh. But their share is gradually falling as local makers, such as Shah, Bashundhara, Seven Circle, Fresh, Premier, and Crown have significantly expanded their capacities.