Overproduction weighs on cement makers
Cement manufacturers are going through a very challenging time because of an unhealthy competition caused by overproduction, market players said yesterday.
There are 37 active cement factories in Bangladesh with a combined production capacity of 58 million tonnes per year against a demand of 33 million tonnes, meaning the capacity exceeds the demand by about 43 percent.
“The sector has run into trouble because of the unhealthy competition among the manufacturers and excess production than the demand,” said Alamgir Kabir, managing director of Crown Cement.
He made the comments while talking to The Daily Star at a three-day conference styled “Intercem Dhaka” organised by Intercem, a UK-based organisation, at Le Méridien Dhaka.
Founded in 1985, Intercem is the global leader in events devoted to market developments, production, trading, transportation and handling of cement and related products. More than 300 delegates from 30 countries are attending the event.
While moderating different sessions, Malcolm Shelbourne, chief executive officer of Intercem, said the demand for cement in Bangladesh has grown 10 percent year-on-year in the last one decade, but per capita consumption was still at a relatively low level of 166 kilogrammes.
Kabir, also president of Bangladesh Cement Manufacturers Association, said major market players may also face losses in the face of the unhealthy competition.
“It will take at least four years to get rid of the unhealthy competition as the demand will increase,” he said, adding that per capita cement consumption will stand at 250kg in 2020.
Zahir Uddin Ahmed, managing director of Confidence Cement, said the industry was running at 55 to 57 percent of the capacity which is below the level needed to reach break-even. “This is alarming for the sector,” he said, adding that the sector would need at least four years to ensure 100 percent use of the capacity.
Ahmed said mega projects undertaken by the government and rapid urbanisation were steering the growth of the sector.
Mohammed Amirul Haque, managing director of Premier Cement, said over-production may cause trouble for the market as competition would accelerate.
Ikram Ahmed Khan, managing director of Shun Shing Group, Hong Kong, sees good potential for the cement sector as the government was implementing a number of infrastructure projects where cement is one of the major raw materials.
For example, he said, the under construction Padma bridge project will consume 3 million tonnes of cement alone. Other mega projects will also need a huge amount of the key construction material. Khan said Bangladesh used to import 95 percent of its cement in 1990, but now the entire demand is met by the local industry, which has been growing by 15.6 percent over the last few years.
The market size of the sector is around $3 billion, or Tk 25,500 crore. Manufacturers have invested more than Tk 30,000 crore in the sector. Local companies are dominating the market. Of the total consumption, individuals account for 25 percent, real estate companies and developers 30 percent and the government 45 percent.