Cement-makers’ plight seems to be over
Cement manufacturers can breathe a sigh of relief at least for now as the sector has been showing some signs of recovery for the last two months from the coronavirus pandemic.
"The economic front of a developing country like Bangladesh can't remain silent for long. Demand will start to rise bit by bit and things will look up soon as cement is a basic ingredient," said Mohammed Amirul Haque, managing director of Premier Cement.
The sector had been reeling from the unprecedented collapse in demand in April and May because of the pandemic, which hammered activity and brought the construction sector to a grinding halt.
Sales have started to bounce back almost to the pre-pandemic level in June and July.
"We have got some orders from the construction sector and our factory is booked until next September," Haque said.
Though sales are picking up, the cement makers are running way below their capacity.
"The sector is yet to turn around to the fullest as factories can utilise only half their production capacity now," said Alamgir Kabir, president of the Bangladesh Cement Manufacturers Association (BCMA).
"Not only the Covid-19 pandemic but also the countrywide floods have wreaked havoc on development work and the cement sector is bearing the brunt," said Mohammad Shahidullah, managing director of Metrocem Cement.
On top of that, the manufacturers were unable to collect dues from dealers and contractors as they too were devastated by the pandemic.
About the loans from the government-announced stimulus package, Shahidullah said 10 per cent of working capital is not sufficient for heavy industries like cement.
The sector is now banking on individual customers and the situation will not improve much until corporate consumption begins, he said, adding that demand from the government's infrastructure projects will rise to the expected levels once floods and the pandemic die down.
Last year too was not so rosy for the cement manufacturers as well: they were put in a tight corner when overproduction led to unhealthy competition.
Because of the pandemic, the growth of the sector will come down to 7 per cent this year from the 12-15 per cent average growth it clocked in the last few years, said Asadul Haque Sufiyan, chief operating officer of Bengal Cement Ltd.
However, after the lockdown announced to curb the spread of the virus was partially lifted on May 30, sales increased slightly as middle-income people and expatriates started purchasing the key construction material, he said.
"But the government's purchase for development projects is still far from expectation," he added.
Many cement manufacturers are not being able to pay back loans as they are struggling to collect dues of the products sold on credit, Sufiyan said, calling on banks to extend support to this end.
He said the pandemic proved that the number of middle-class consumers is expanding and this segment is important for maintaining the sectoral growth.
The sector's confidence is still intact largely because of the steadily growing demand in a country where per capita cement consumption is very low and there has been a construction spree of large infrastructure since before the onset of the pandemic.
To complete the Padma bridge project, it is estimated that three million tonnes of cement will be used. Other mega projects will require similar amounts.
There are 37 active cement factories in Bangladesh and more than Tk 30,000 crore has been invested in the industry.
Manufacturers have a combined annual production capacity of 58 million tonnes against local demand for 33 million tonnes.
In the 1990s, Bangladesh used to import 95 per cent of its demand for the key construction material, but the requirement is now met entirely by the local industry.
Local companies dominate the market and annual sales have reached $3 billion, according to the BCMA.
Of the consumption, individuals account for 25 per cent, real estate companies and developers 30 per cent and the public sector 45 per cent.
The industry employs 60,000 people directly and another one million indirectly.
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