 | Cement plants face closure on production costs
01 August, 2008
More and more cement factories, especially small ones, are facing closure due to price hike of raw materials and low demand for the construction material.
Out of the 123 cement companies that had been registered with the Board of Investment, only 73 came into operation. Of these 73, at least 23 cement-manufacturing plants were shut down in last one year.
According to Bangladesh Cement Manufacturers Association (BCMA), most of the factories in Mongla, Khulna, Jessore and North Bengal areas have been shut down because of their financial inability to compete with big market players in the face of rising production cost.
Bangla cement, Taiheiou, Esco, Karim, Khulna, Noor Cement, Apan and Doel have already shutdown their manufacturing plants. Even Megna cement, produced by Bashundhara -- one of the largest business conglomerates in the country -- also reduced its production capacity recently, BCMA sources said.
Bangladesh's cement industry totally depends on imported raw materials, of which clinker is the main one. About 5-6 million tonnes of clinker is imported annually from Thailand, Indonesia, Malaysia and the Philippines. Clinker is also imported in small quantity from India by railway.
“The price of raw materials, especially clinker (major component for cement manufacturing), has gone up by about 30 percent in one year,” Azizur Rahman Selim, secretary of BCMA, said.
According to industry sources, clinker price has increased to $73 a tonne from $55-63 a tonne a year ago.
Price of other raw materials for cement like gypsum, fly-ash and slag have not only increased but also become unavailable because of extra demand for these items in countries such as China and India where the raw materials are produced, market players said. Gypsum is now selling at $42-43 per tonne as opposed to $32- 35 in 2007, while fly ash and slag are being sold at $18-20 and $32-35 a tonne respectively.
To make things worse, cement consumption in Bangladesh has gone down significantly in 2007. Total cement consumption in 2006 stood at 8.4 million tonnes, which came down to 8 million tonnes in 2007 due to less demand from the construction sector.
“Considering the economic growth, the consumption was supposed to be nine million tonnes in 2007,” Shankar Kumar Roy, general manager, Holcim (Bangladesh) Ltd, said.
Exorbitant steel price, slowdown of public sector construction works and unwillingness to disclose the source of income contributed to the downward trend in construction industry in Bangladesh, he added.
According to the market players, Bangladesh's cement industry is over-saturated with an annual capacity of 21 million tonnes against the demand for around only 8 million tonnes.
“The country's cement industry is now in a critical state. Factories have surplus production capacity against a fall in consumption demand and are unable to pass on the additional cost on to the consumers,” the Holcim general manager said.
The factories in operation are also unable to utilise their full capacity, the BCMA secretary said.
The industry sources also blamed lack of adequate power supply for making the industry more vulnerable. Rise in transportation costs following price hike of fuel, loading restriction imposed on vehicles crossing over the Jamuna Bridge and priority movement of vehicles carrying food grain are also causing problems for the industry.
“Considering the facts, an inescapable reality is that the cement industry is burdened with a 30-35 percent extra cost in a span of only one year, while the industry was able to enhance price by only 5 percent during the period,” Roy said.
The retail prices of each bag of cement of major brands Holcim, Scan, Cemex and Lafarge are Tk 370, Tk 368, Tk360 and Tk 355 respectively. Other major brands, such as Shah, Crown, Seven Ring, Fresh and Premier are selling at Tk 355, Tk 356, Tk 354, Tk 350 and Tk 360 per bag respectively.
Release link:http://www.thedailystar.net/story.php?nid=48381
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