This week, CemNet reported that MI Cement Factory in Bangladesh expects the domestic cement sector to grow by 10 per cent in 2019 and should also reach double-digit growth in 2020. The country is embarking on some major infrastructure projects, especially around Dhaka and Chittagong, which will drive up consumption in the medium term.
With the country's urbanisation at 37 per cent and per capita consumption only around 164kg – only just more than neighbouring Myanmar (141kg) but lower than Bhutan (738kg) and Nepal (289kg) – there are considerable opportunities for cement producers to consolidate the domestic market and gain economies of scale.
Domestic cement demand reached 29.9Mt in 2018. This is still some way below the installed capacity of nearly 50Mta, while capacity utilisation is estimated at around 60-65 per cent. Bangladesh, which only has one integrated cement producer, is one of the biggest clinker importers worldwide, with 18.8Mt entering the country in 2018.
Multinationals lead the market
Some 80 per cent of the domestic cement market is met by the top 10 producers with global producers LafargeHolcim and HeidelbergCement having the leading market shares. HeidelbergCement increased its capacity following the acquisition of Emirates Cement Bangladesh Ltd in December 2019 from UltraTech Cement Middle East Investments Ltd. The deal, which includes a 0.6Mta grinding unit, marks UltraTech's exit from the Bangladesh cement market and reportedly forms part of the Indian cement major's deleveraging plan.
New investment
The industry is changing with companies like Meghan Cement Mills and Crown Cement Group (MI Cement Factory) introducing more efficient VRM technology. Premier Cement has doubled its cement capacity from 2.4Mta to 5.16Mta. FLSmidth is installing VRMs for Premier Cement at both its Narayangi and Chattogram plants.
Meanwhile, MI Cement Factory will increase its capacity from 3.3Mta to 5.8Mta in 2021. The company will add new capacity by constructing a greenfield 8400tpd plant in Muktagachha. Seven Rings Cement also aims to raise its capacity from 3.4Mt to 5Mt with a 1.5Mta greenfield plant in Chittagong.
Other projects include Confidence Cement's new 5000tpd plant, in Palash, Narshingdi, Dhaka, is to be named Confidence Cement Dhaka Ltd. Siam City Cement (Bangladesh) also has plans to expand its capacity at the Narayanganj grinding plant from 0.55Mta to 1.2Mta.
Current market conditions
Cement producers are currently in the season for peak sales (November to April), but cement prices were reported to be falling in October following an increase in July 2019. This is putting pressure on profit margins. Cement manufacturers are particularly sensitive to raw material and clinker price rises as most of these materials are imported. In 2018 clinker prices rose by US$10/t while imported slag from China, India and Japan also saw US$5/t increases. Nevertheless, Crown Cement increased its use of slag from seven to 16 per cent and reduced its clinker factor down from 81 to 72 per cent.
Outlook
For cement producers who are able to win some of the large infrastructure projects for which the government has allocated some BDT306bn (US$3.6bn) in the 2017-18 budget, the outlook is positive. Over the next five years there are some huge construction projects in the offing, such as the US$2.7bn Dhaka Rail project, the US$12.65bn Roopur Nuclear Power plant and the US$2bn Dhaka-Chittagong Elevated Expressway. The Government's Delta Plan 2100 will also see US$37.5bn spent on flood defences by 2030.