Cement industry rebounds

The cement industry has made a significant comeback after the reopening of the economy in early June from an unprecedented collapse in demand in April and May amid coronavirus-induced nationwide shutdown.

The industry's revival has been fuelled by the resumption of work in the infrastructure and construction sector which has returned to near-normal.

Around 90% of some 35 lakh people working in this informal sector have got back to their work, said Tayebur Rahman, organising secretary of Bangladesh Imarat Nirman Shramik Union (construction workers' union).

According to industry insiders, around 70% of the cement manufacturers have entered the growth trajectory since June in spite of a 52% decline in sales in the April-May period.

The sectoral growth in the three months from June to August is a healthy 6.60%.

However, overall, the sector suffered a negative 6.98% growth in the January-August period of this year.

The sector achieved an 11% growth in June compared to the same period last year. After experiencing a slowdown in July due to flooding in many parts of the country, the industry attained a 9% growth in August.

During this time, smaller companies did better than the larger ones.

Meanwhile, some cement companies attained growth in the overall count of the first eight months of the current year compared to last year.

People involved in the industry said the cement sector has achieved a faster recovery than other sectors as the rural economy has been vibrant and infrastructural development projects have restarted. They are expecting a considerable growth in this sector at the end of the year.

Md Shahidullah, vice-president of Bangladesh Cement Manufacturing Association, said, "Government projects were halted during the Covid-19 shutdown. As a result, sales of big companies declined up to 90%.

"On the other hand, small companies continued their sales marketing in rural areas. The rural economy was active during the period. From June, the sales of the big companies started to increase again."

Industry insiders said at least six companies achieved growth in January-August despite the pandemic. Among those, Bengal Cement achieved a whopping 107% growth, while Mir Cement attained a 29% growth. The other significant players did pretty well – Anwar Cement grew 10%, Diamond Cement saw a 7% growth, Akij Cement grew by 6% and Meghna Cement achieved 4% growth.

An official of Bengal Cement said on condition of anonymity, "As we are a new company and we have focused our sales outside Dhaka, we have done much better in the first nine months of the year than the previous one."

He said the sales of Bengal Cement, which commenced its journey in 2018 intending to produce 18 lakh tonnes of cement per year, increased notably amid the Covid-19 shutdown compared to the same period of the previous year.

However, other companies that achieved growth have been in the market for several years. Some of them faced negative growth in the two months of the lockdown. But since June, several companies have been able to achieve growths of up to 40%.

Monwar Hossain, managing director of Anwar Cement, said, "Though almost everything was halted during the lockdown, construction projects in many places were kept on track. The rural economy was also strong.

"Many expats who returned from abroad during the time started to build houses. On the other hand, construction across the country started again after the lockdown was lifted. Work on the megaprojects also resumed creating a significant demand for the vital construction material."

"No sector has more than 5% duty on intermediate raw materials. But in the cement sector, it is more than 15%. A huge amount of money from businesses get stuck because of the 3% advance tax," says Amirul Haque, managing director of Premier Cement

According to the Bangladesh Cement Manufacturers Association, among 36 companies operational right now, only seven were in negative growth in August. The overall growth in the cement sector this month was more than 9%.

In April and May, the sales of Shah Cement, the leading brand of the country, dropped by 37% and 27% respectively compared with the same months of the earlier year. The company was in negative growth in June too.

But in August, the company achieved 14.30% growth compared with the same period last year. The company has shown a negative growth of 8.07% in the first three quarters of the year.

Shah Cement is one of the cement suppliers of the Padma Bridge project, the largest ongoing project in the country. The company has 13.32% share of the total market. But during the pandemic, the market share has decreased to 13.17%.

An official of Abul Khair Group, the mother company of Shah Cement, on condition of anonymity said, "Our sales decreased in January as the Padma Bridge project was halted because the Chinese engineers were stuck in their country. But since July, the supply has increased. There would be no negative growth next year."

Bashundhara Cement, another supplier of the Padma Bridge project, also lost a portion of its market share due to the Covid-19 pandemic. The sales of the company's cement decreased 45% to 40% respectively during the first two months of shutdown. But the company returned to growth in June-August period. Some other companies also bounced back during this time.

Unique Cement, the second leading company of the market, had a 46% negative growth in April-May. In June-August, the company got on average more than 30% growth. The market share of the company has increased to 8.39% in 2020.

All the big companies of this sector including Premier Cement, Crown Cement, Seven Rings Cement, Seven Circle Cement, Heidelberg Cement and LafargeHolcim have gained back their momentum.

However, businessmen claim the recovery has also stumbled because of the illogical tax structure of the government.

Amirul Haque, managing director of Premier Cement, said, "No sector has more than five percent duty on intermediate raw materials. But in the cement sector, it is more than 15%. A huge amount of money from businesses get stuck because of the 3% advance tax."

Currently, there are 35 cement factories in the country with a production capacity of eight crore tonnes of cement. The country has a demand for 3.5 crore tonnes which would add 1.1 crore tonnes more in the next three years.

Around 81% of the cement market is controlled by 10 leading companies.

Some Tk42,000 crore has been invested in this sector. Of that, around Tk30,000 crore is from bank loans. More than one lakh people are working in this sector.