Large government infrastructure projects and increased urbanization are boosting the local cement industries, as the sector has been growing more than 12.50% in the last five years, according to multiple studies and sector people.
Currently, more than 32 cement manufacturing companies, four of them multinationals, produce around 30 million tons of cement per annum.
Local companies hold more than 80% of market share, beating the multinationals by their attractive prices and quality.
Higher per capita incomes and sustained period of political stability helped grow the sector amid huge construction works in both public and private sectors, studies observed.
“Demand for cement has registered a robust the Compound Annual Growth Rate (CAGR) of 12.67% over the last five years. This is significantly higher than the country’s GDP growth, according to a recent study of LankaBangla Investment Ltd.
Average per capita cement consumption in the world is 500kg while that of Bangladesh is only 120kg, the study said referring to a World Bank.
According to another study of Lafarge Surma Cement, nearly 40% of total cement used in a single year is consumed in the construction of private homes followed by 33% in government buildings and infrastructure, 24% is used to build real estate and commercial buildings.
The remaining 3% cement is used for other purposes, said the study.
“A sustained period of political stability has provided stable and growth supportive environment,” said the report of LankaBangla Investment Ltd.
“Increased urbanization has been a key factor in the rise of the cement industry. Furthermore, higher per capita incomes have resulted in greater affordability while changing lifestyles have resulted in more nuclear families. These factors have contributed to consistent rise in the demand for construction materials such as cement.”
Large government infrastructure projects have sustained the growth in cement demand amid a slow real estate recovery, it further said.
People involved in the cement sector said large government infrastructure projects have shot the demand for construction materials, including cement.
In a recently surveyed report by the Cement Manufacturer’s Association, it has been found that there is production capacity of 40 million tons per annum, whereas actual production is hovering around 32million tons.
The machinery, equipment and manufacturing sites are not being utilized fully by the cement manufacturing companies. On an average the utilization rate by these companies is currently around 75-80%, the survey said.
The sector-related people say companies could not reap benefits of lower clinker prices due to the domestic price war. For the production of cement, two types of material are required — calcareous material such as limestone, chalk, etc., and the another is clay, which are extracted from quarries.
Limestone is the primary raw material for producing cement clinker. There are also other raw materials used in the cement industry.
Bangladesh depends on imports and it is one of the largest importers of clinkers globally. Of the 32 cement producers that are currently in operation, only two have clinker production facilities in their own plants. One is Chhatak Cement Factory Ltd, a government owned company, with limited production capacity and the other is LafargeHolcim Bangladesh Limited.
Out of seven listed companies in the premier bourse, six are listed in the ‘A’ category, meaning the companies regularly provide dividends to shareholders. The remaining one listed firm – Aramit Cement Limited fall under the ‘Z’ category.
The cement sector contributed 2% of the total turnover of the Dhaka Stock Exchange (DSE) in the last month, compared to 2.49% in September, 1.06% in August, and 1.41% in July, according to DSE data.
The listed Cement sector companies are Confidence Cement, Heidelberg Cement Bangladesh Ltd, LafargeHolcim Bangladesh, Meghna Cement Mills, M.I. Cement Factory (Crown Cement), Premier Cement Mills and Aramit Cement Limited.
Currently, only 32 factories are in operation, including four multinational companies. At present, 81% of the total market share is held by top 10 manufacturers. Among the top 10 cement market players in Bangladesh, eight are local and two are multinationals.
Multinational cement companies are facing intensive competition with local ones which are grabbing the top slot of the industry by operating along the economy of scale and with deft marketing strategies. Multinationals now hold only 25-30% of the total market share, industry sources said.
As a result of failure to penetrate the market, two of the global cement groups, UAE based Emirates Cement and Mexico based cement manufacturer Cemex have recently divested their Bangladesh operations. However, the acquisition of Holcim by Lafarge Surma will reshape the industry dominance in Bangladesh in the days to come as both companies already operate their own businesses in the domestic market, sector people said.
After the completion of acquisition, Lafarge Holcim has the 2nd place in terms of market share.
Another recent study by EBL securities revealed that Shah Cement holds 14% of the market share, while Lafarge Holcim holds 11.8%, Bashundhara Group 9.1%, Seven Rings Cement 8.1%, Heidelberg Cement 8%, Premier Cement 6.6%, M.I. Cement (Crown Cement) 6.6%, Fresh Cement 6.5%, Akij Cement 4.2%, and Confidence cement 2%, according to the study.
The sector-related people say Bangladesh is a populous country. On the other hand, the country’s economy continues to grow steadily. Therefore, construction of multi-storied buildings across the country is going on in full swing.
Urbanization in various cities including Dhaka is increasing. Construction of major infrastructure mega projects including the Padma Bridge, Metro Rail and Dhaka Elevated Expressway is boosting the demand.
Further, the use of cement in the villages is increasing more than urban areas, cement traders said.
“Foreign remittance has been playing a vital role that encourages rural people to construct buildings for their living,” a trader said.
Belal Hossen, executive director of the Bangladesh Cement Manufacturers Association (BCMA) told the Dhaka Tribune: “The cement sector is growing day by day as demands keep soaring. At the same time, foreign currency earning is also increasing through limited scale exports.”
Terming the industry mostly dependent on import for its raw materials, the association leaders urged the government to lower tariffs for further expansion of the sector.