Bangladesh cement industry to expand despite rise in raw material costs

The Bangladeshi cement industry is expanding its capacity despite increases in raw material costs. In 2017 the effective capacity of active plants stood at about 50.20Mta, which is estimated to reach about 65Mta by 2019, according to the annual report of MI Cement Factory Ltd.
 
Cement consumption stood at about 27.1Mt in Bangladesh last year. But despite the huge growth of the industry, Bangladesh is still one of the lowest consumers of cement products in the world. The demand is expected to grow around 10 per cent, per year, in the next five years. Currently the industry is experiencing overcapacity of cement production. But the capacities have been under-utilised, as roughly 54 per cent of the capacity is being used.
 
The report point outs that industry is facing high input cost, which are now severely affecting the performance of the cement industry. Raw material prices have risen sharply compared to the previous year. Of particular mention is clinker price that has skyrocketed due to scarcity of clinker from Vietnam, the major source of clinker for Bangladesh. The cost of other raw materials, such as slag, fly ash, gypsum and limestone, has also increased significantly.

In addition to the price rise initiated by suppliers, freight costs have also increased sharply due to higher fuel and charter costs. Transport costs have been further affected due to the weight restriction imposed by the government on highways. Moreover, a major devaluation of the take against the US dollar has exacerbated the effects of the price changes. Finally, interest costs have spiralled due to the huge liquidity crisis towards the beginning of the year.