Bangladesh cement industry to grow 10%

Bangladesh's cement industry continues to show double-digit growth in 2019 as indicated by the available data to date, according to the annual report of MI Cement Factory Ltd. The company estimates that the year will close with the domestic cement market growing by 10 per cent.

According to recently released report, demand for cement in Bangladesh during 2018 was around 31Mt and therefore, forecasts anticipate a full-year demand of 34Mt for 2019.

On the supply side, big players continue to add capacity. Total installed capacity is around 68Mta with an effective capacity of 58Mta. Major players are now trying to use their additional capacity, which continues to exert downward pressure on selling prices. Therefore, cement producers are unable to pass on spiralling cost increases to customers.

Outlook
Looking at the market in 2020, demand is forecast to continue its double-digit growth trend and will be mainly led by mega projects such as the Matarbari-Moheshkhali project. However, with industry capacity set to increase, prices will remain under pressure. Moreover, cement producers will face a challenging freight market. The recent imposition of low-sulphur fuel will lead to cost increases since refiners will take time to switch to this fuel, leading to a demand supply mismatch. If the Bangladeshi taka devalues further, there will be additional cost increases. Furthermore, electricity costs may see a further escalation with the increase in gas price. The change in domestic fuel price will increase transport costs, which are quite significant for the industry. These factors indicate that the industry will continue to face margin pressures despite the buoyant demand.