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Cement Industry of Bangladesh: Challenges and Future Opportunities

As a developing country, building and construction activities are a constant in Bangladesh. Along with the growth of the construction and infrastructure activities in Bangladesh, the cement industry is also growing. At present, besides satisfying the local demands the country’s cement industry is also exporting to neighboring countries like India, Myanmar, Nepal, Maldives, and Sri Lanka. Currently, local companies are leading the country’s cement industry. According to the Bangladesh Cement Manufacturers Association (BCMA), the annual sales of the cement industry in Bangladesh have reached 3 billion.

Cement Industry Overview

The first cement factory of Bangladesh “Chhatak Cement Factory Limited” was established in Sylhet in 1941. Formerly known as “Assam Bengal Cement Factory”, Chhatak Cement Factory Limited is currently a state-owned cement company. Later, in 1973, the second cement factory of the country “Chittagong Cement Clinker and Grinding Factory Limited” was established in Chittagong. But the production capacity of these factories were very limited and that was not enough to meet the country’s demand. Therefore, Bangladesh had to rely on imports to meet the country’s cement demand. According to DataBD, about 95% of the country’s total cement was imported from Indonesia, China, Malaysia, and India until the mid-1990s.

Until the mid-1990s, almost 95% of the total cement was imported from Indonesia, China, Malaysia, and India.

With the development of the country and the increasing amount of construction, local entrepreneurs and various multinational companies started producing cement in Bangladesh during the nineties after witnessing the potential of this industry. Companies like Confidence Cement Limited (1991), Meghna Cement Mills Limited (1992), and Aramit Cement (1995) started operating in the country in the ‘90s. At the same time, Hyundai Cement Bangladesh Limited, the first multinational cement factory in Bangladesh, started its operations. After Hyundai Cement, multinational players like Heidelberg, Lafarge Holcim, Simex, and Ultratech also started entering the Bangladeshi market.

In 1996, Heidelberg Cement Group started its journey in Bangladesh by creating a floating terminal with an onboard packaging facility at the Chittagong Port. Later in 1999, the Heidelberg Group established a plant named Scan Cement Limited at Kanchpur, further strengthening their position in the domestic market. In 2000, they bought a minority stake in the country’s second cement factory, Chittagong Cement Clinker and Grinding Factory Limited. In 2003, the two companies merged to continue operating as Heidelberg Cement Bangladesh Limited. The country’s dependency on cement imports has gradually dropped in the years since the start of these operations, while the industry has grown fast. According to the BCMA, the number of cement companies in the country increased almost four times 4X during the period from 2008 to 2018.

According to the Bangladesh Cement Manufacturers Association (BCMA), there are about 76 registered cement manufacturing companies in the country. And as per The Daily Star issue of December 2020, there are 37 active cement factories in the country. The country’s top 10 companies currently control about 81% of the total cement market. According to BCMA, Shah cement is leading the market with a market share of about 13% (12.96%), and with more than 12% market share (12.13%) Bashundhara Kings is in the second position, followed by Fresh (8.62%) in the 3rd position, Crown (8.26%) in the 4th position, and Seven Circle Cement (8.21%) in the 5th position. Of all the cement companies, 7 are currently enlisted in the country’s stock market which includes Aramit Cement, Confidence, Heidelberg, Lafarge, Meghna, MI and Premier Cement. The majority of the country’s cement grinders are located within five regions that include Munshiganj, Narayanganj, Meghnaghat, Chittagong, and Mongla. According to a report by IDLC in January 2021, the cement industry employs 60,000 people directly and employs about one million people indirectly.

Shah Cement, Bashundhara Kings, Fresh, Crown, and Seven Rings owns 12.96%, 12.13%, 8.72%, 7.27%, and 7.21% of the total cement industry respectively.

According to another report by IDLC, with the economic development of Bangladesh, the annual per capita cement consumption has increased from 45 to 200 kg in the last two decades. The public sector consists of 45% of total consumption, with real estate companies consuming 30%, and individuals consuming 25%. According to Mohammad Shahidullah, vice-president of the Bangladesh Cement Manufacturers Association (BCMA), the monthly demand for cement in Bangladesh is 4 million tons. Currently, the price of cement per 50 kg bag is around Tk 450, which has recently increased by Tk 30. According to a research by EBL Securities, 60% of produced cement is consumed in winter. The peak season for cement sales is usually between November to April.

Bangladesh usually produces two types of cement, Ordinary Portland Cement (OPC) and Portland Composite Cement (PCC). These two types of cement are widely known as CEM-1 and CEM-2. Leading Portland Composite Cement or PCC is ahead of Ordinary Portland Cement in durability. Until the production of PCC started in Bangladesh in 2003, OPC was widely used. 

The public sector consumes 45%, real estate companies consume 30%, and individuals consume 25% of the total annual cement production.

Besides cement production and sales, the companies also offer customers ready-mix concrete solutions that are made from a mixture of cement, sand, crushed stone, and water. This concrete solution is prepared for direct use from the mixing plant and supplied by a transit mixer truck. Generally, ready mix concrete service is quite effective for large projects. Many cement companies also provide services like customer delivery support and various education programs.

According to Cement Market Research in 2021-2028, the global cement market size in 2020 was about 314 (313.60) billion dollars, which is expected to reach 455 (454.64) billion dollars by 2028. Vietnam is currently the largest exporter of cement in the global market. According to WorldTopExport Vietnam’s total exports in 2020 were 1.4 billion USD. The list of top exporters also includes countries like Turkey, Thailand, Germany, and Canada. On the other hand, according to data from the Export Promotion Bureau, the export of cement, salt and stone sector in Bangladesh were 10.41 million USD in the fiscal year 2018-2019, which decreased to 9.14 million in the fiscal year 2019-20. According to an IDLC report, 90% of Bangladesh’s cement is exported to India.

The outbreak of the 2020 epidemic has had a significant impact on the market growth, supply, and sales of the cement industry. While the average growth rate of the cement industry in the past 7 years has been around 11.5%, the growth rate decreased and dropped to about 7.65% from January to August 2020. During the pandemic, all major government and private development projects in the country were shut down for a long time. This resulted in a 90% drop in sales for large cement manufacturers. According to a report by IDLC, during the lockdown, manufacturers were able to utilize only 10% of their total capacity, which resulted in a loss of BDT 3,000 crore. The companies also faced issues such as raw material crisis, stagnation of real estate activities, and missed peak season sales. However, when the situation became normal, the industry bounced back very quickly. Sales began to recover as the government mega-projects and real estate activities resumed. Lafarge Holcim, one of the largest multinational cement manufacturers in Bangladesh, was able to earn almost double the profit from January to September 2021. In the first three quarters of this year, their profit was BDT 308 crore, which is 106% higher than the profit of BDT 149 crore in the same period last year.

Trend in cement market growth through 2015 to 2020.

Current Trends

Moving From Multi Purpose Cement to Speciality Cement 

Back in the day, the same cement was used for multiple purposes. But nowadays, besides Ordinary Portland Cement (OPC) and Portland Composite Cement (PCC), brands are bringing in different products in the market based on usage such as, Lafarge Holcim Ltd.’s “PlasterCrit”, which is a specialized cement for plastering only. Also, the product line of brands like Shah Cement and Crown Cement includes “Blast Furnace Cement” which is used to make long-lasting and strong concrete structures.

Branding and Marketing

There was a time when Bangladesh’s cement companies would spend very little on their marketing and promotion. In the last two decades, with the increase in the number of cement manufacturers in the country, various promotional ad campaigns and digital advertisements of this industry are now quite noticeable. Besides traditional outdoor advertising, brands are launching various campaigns based on various global and national events. The involvement of cement companies in awareness programs is also increasing. Campaigns like Shah Cement’s Father’s Day Campaign “A Father’s Word” and Crown Cement’s “Export TVC” have been able to attract local and foreign audiences. With the increase of branding and marketing activities among the manufacturers, consumer awareness is also increasing.

Reasons Behind Growth

Government Projects

The continuous growth of the cement industry is a result of the Bangladesh Government megaprojects. In the fiscal year 2019, a total of 7 infrastructure megaprojects, including bridges, railways, power plants, and Metrorail, had a budget of more than 3.5 billion USD, which directly has a big impact on the cement industry. Also, other government public services and industrial development are helping the cement industry to move forward.

Higher Income Per Capita and High Remittance 

The per capita income and remittances of the country’s population are increasing. According to a report by the Financial Express in November 2021, per capita income for the fiscal year 2020-21 increased by 327 dollars to 2,554 dollars compared to the previous fiscal year (2,024 dollars). According to another May 2021 report by the Financial Express, Bangladesh’s remittance inflows in 2020 increased by about 18.4 % and reached 21.7 billion USD. As a result, many people are encouraged to build their own homes and, consequently, cement consumption is increasing.

Bangladesh’s remittance inflows in 2020 reached 21.7 billion USD thanks to cement consumption.

Increasing Urbanization and Real Estate

People from the rural areas are constantly moving to the urban areas in the hope of better education and livelihood. According to Statista, as of 2020, the population of the urban cities in Bangladesh was about 65 million, which was around 50 million in 2011. As a result, residential and commercial building construction is on the rise in urban areas like Dhaka, as well as in other parts of the country, to meet the housing demand of this growing population. This also results in the increasing demand of cement.

Challenges 

Overcapacity

According to a report by The Daily Star in December 2020, cement manufacturers currently have an annual combined production capacity of 58 million tons, whereas the local demand is only 33 million tons. This means the cement industry has a surplus production capacity of 43% of the total demand. According to the Bangladesh Cement Manufacturers Association (BCMA), as the big players in the industry will increase their production capacity in the next 2/3 years, the overcapacity rate may increase further for some time. Due to overcapacity, factories have to face issues like increased utility bills or additional production costs. As cement is a heavy product, it is not possible to export extra cement in large quantities later. As a result, this increases the production and operating expenses and impacts the profit margin.

Dependency on Imported Raw Materials

18.6 million tons of cement clinker, granulated slag, limestone flax, and gypsum had been imported in the fiscal year 2019-2020.

Clinker is one of the most important raw materials in cement production. And, the main ingredient in making clinker is limestone, which cannot be supplied from Bangladesh. There are currently only two manufacturers in Bangladesh who produce clinker themselves, the first being the state-owned company Chhatak Cement Factory Limited, which has a very limited production capacity. The other is Lafarge Surma Cement Limited, which produces about 10% of the total clinker required in Bangladesh. Imports include issues of high tax, import duty, and foreign exchange. According to Chittagong Custom House, in the fiscal year 2019-2020, cement companies imported 18.6 million tonnes of cement clinker, granulated slag, limestone flax, and gypsum. Most of which come to the country through the Chittagong port. While Bangladeshi manufacturers once relied heavily on China for raw materials, they are now being imported mostly from countries like Thailand, Vietnam, Malaysia, and Indonesia.

High Logistic Cost

Due to the poor road connectivity and infrastructure in Bangladesh, the cost of transportation of manufacturers increases significantly with each step, from sourcing raw material to delivering customer orders. On the other hand, to reduce the pressure on the roads of the country, the government of Bangladesh formulated a policy to reduce the truckload. As a result, manufacturers need multiple trucks for delivery and this has increased the production cost. Producers, on the other hand, want to transport cement and raw materials by boat, but this is not possible due to a lack of cargo boats.

Opportunities

Mordor Intelligence predicts that the construction industry of Bangladesh will grow by 8% from 2020 to 2025.

Growing Economy

With a growing economy, the activity of the government, private, and commercial construction is constantly increasing in Bangladesh. According to Mordor Intelligence, the construction market in Bangladesh is expected to grow at a rate of 8% per annum from 2020 to 2025. This will naturally increase the demand for cement products.

Future Potential of Cement Exports in India

Bangladeshi cement is gaining popularity in India due to its relatively low shipping cost, competitive price, and export quality. According to a September 2020 report by Simnet, the Bashundhara Group of Bangladesh was planning to increase its capacity by investing 117.7 million dollars to export to India’s Seven Sister States. In other words, even if it is not possible to export large quantities of cement to distant countries, Bangladeshi manufacturers have the opportunity to grab more export opportunities in Northeast India or the Seven Sister States.

Concrete Hollow Block

Concrete blocks are standard rectangular-shaped blocks used in building construction. A single concrete block can be used in place of five ordinary bricks, which reduces construction costs. The low weight also reduces the cost of the structural design of the building. Concrete blocks also reduce the size of foundations and superstructures. In addition, the use of less mortar in the construction of hollow concrete blocks reduces the time, labor, and cost at the same time. The main component of the concrete block is Portland Cement. The use of concrete blocks in the country is likely to increase further in the future and there is an opportunity for large manufacturers to occupy this market by producing concrete blocks.

Reinforced Cement Concrete (RCC) on Road Construction

RCC or Reinforced Cement Concrete is said to be a very strong and versatile material in construction work. The use of RCC not only increases the strength of the concrete but also helps to withstand temperature and compressive stress. According to industry experts, the use of RCC in road construction should be further enhanced which will help roads to be sustainable. It is hoped that the use of RCC in road construction will increase further in the future, which will have a positive impact on the growth of the overall cement industry.

Report

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