After a trying year, cement makers bracing for slow recovery
With the year about to come to a close, the cement sector finally experienced some relief from the ongoing pandemic thanks to increased consumption alongside fresh investments.
Makers of the key construction material have been in a tight spot since the Covid-19 outbreak began as almost all major development projects in the country, both public and private, were halted for an extended period.
"The cement sector managed to survive even though the manufacturers sat idle throughout April-September," Mohammed Amirul Haque, managing director of Premier Cement, told The Daily Star.
But now, there are various projects to work on, including mega projects such as the Karnaphuli Tunnel.
"We got some orders from the construction sector and our factory is running at full capacity," he said, adding that Premier Cement supplies cement to at least 77 government projects.
According to the managing director, there is no need to waste time on counting losses amid the pandemic since no one knows when the situation will return to normalcy.
Despite these turbulent times though, investment in the cement sector did not cease as around Tk 2,300 crore was spent on the industry over the past few months.
Of this amount, Premier Cement spent Tk 800 crore to establish a new unit in Narayanganj and another for Tk 500 crore in Chattogram. However, the new units are yet to begin production despite having been ready since March.
"We could not start production within the stipulated time due to the absence of some technical experts and workers of China and Denmark," Haque said.
Now, the cement maker expects to begin commercial production next March or April.
Bangladesh's cement sector has 43 per cent overcapacity and like others local Bashundhara Group also had unused capacity. So the group went beyond borders for opportunities and finally found it in Northeast India.
The local industrial conglomerate is trying to grab the export market of this region through a Tk 1,000 crore investment geared towards doubling its manufacturing capacity through the establishment of a third production unit.
To materialise the plan, Bashundhara is mobilising Tk 700 crore from banks.
Bank Asia is acting as the lead arranger of this syndicated term loan for Bashundhara Industrial Complex while the other participants are: Dhaka Bank, First Security Islami Bank, Pubali Bank, Social Islami Bank and United Commercial Bank.
Through this expansion, Bashundhara's daily production capacity will reach 25,000 tonnes.
Khandoker Kingshuk Hossain, chief marketing officer of Bashundhara Cement, told The Daily Star that the sector will shrink by about 3 per cent this year due lower consumption compared to last year.
The cement sector's market size reached 34.12 million tonnes in 2019 and it may come down to around 33.15 million tonnes this year.
"Business does not run equally every year as there are ups and downs. But this year was different due to the Covid-19 fallout," Hossain said.
The sector suffered an unprecedented collapse in demand between April-May, when the government declared a nationwide shutdown to curb the spread of Covid-19.
Sales started to bounce back to pre-pandemic levels from June-July.
"But it will still take time to return to full capacity as both government and private development works are yet to gain momentum," said Mohammad Shahidullah, first vice-president of the Bangladesh Cement Manufacturers Association (BCMA).
Regarding the overall situation, he said that aside from the coronavirus pandemic, repeated flooding has wreaked havoc on the country's construction projects and the cement sector is bearing the brunt.
Besides, manufacturers were unable to collect their dues from dealers and contractors as they too were devastated by the pandemic, added Shahidullah, also managing director of Metrocem Cement.
Cement makers often found themselves in a tight spot even before the pandemic began, when overproduction led to unhealthy competition.
Asadul Haque Sufiyan, chief operating officer of Bengal Cement, recently said that because of the pandemic, cement consumption will likely to come down to 7 per cent this year from the 12-15 per cent average growth it clocked for the last few years.
Sales increased slightly as mid-income people and expatriates started purchasing the key construction material but the government's purchase for development projects is yet to reach expected levels, he added.
The sector's confidence is still intact largely due to steadily growing demand in a country where the per capita cement consumption is very low.
There are 37 active cement factories in Bangladesh and more than Tk 30,000 crore has been invested in the industry.
Manufacturers have a combined annual production capacity of 58 million tonnes against a local demand of 33 million tonnes.
In the 1990s, Bangladesh used to meet 95 per cent of its total demand for cement through import but the requirement is now met entirely by the local industry, where annual sales have reached $3 billion, according to the BCMA.
Of this consumption, individuals account for 25 per cent, real estate companies and developers 30 per cent and the public sector 45 per cent.
The industry employs 60,000 people directly and another one million indirectly.