Cement and steel: The twin backbones of nation-building at a crossroads

Every bridge, every highway, every factory floor, and every family home in Bangladesh begins with two materials: cement and steel. Together, they are the physical vocabulary of development, the means by which national ambition is translated into concrete and rebar. As the Chief Financial Officer overseeing both a cement and a steel (ispat) manufacturing company, I sit at a vantage point where the balance sheets of these two industries meet the balance sheet of the nation.

And from that vantage point, the view today is one of extraordinary long-term promise shadowed by serious short-term strain.

Bangladesh's cement industry is, by any measure, a private-sector success story. Around forty-one operating plants now command an installed capacity of roughly 86 million tonnes a year, capacity built by entrepreneurs who believed, correctly, in this country's growth story. Yet domestic consumption in 2025 stood at around 40 million tonnes, meaning the industry as a whole is running at well below half of its capacity, with many plants operating at 30 per cent or less against a global efficiency benchmark of 70 to 80 per cent.

The steel industry tells a parallel story. Local mills can produce over 13 million tonnes of steel a year, with capacity heading towards 15 million tonnes as new plants come online, while effective demand has hovered near 7 million tonnes and, at points during the recent downturn, fell well below that. Rebar prices touched multi-year lows, and mills have been running at 30 to 40 per cent utilisation.

This demand–supply disparity is the defining commercial fact of both industries today. Overcapacity is not inherently a failure; it is capacity built in anticipation of a future that is still coming. Cement demand in Bangladesh has historically grown at around 8 per cent a year; at that pace, today's 'excess' capacity would be fully absorbed within eight to nine years. The question is not whether demand will return, but whether companies can financially survive the interval, and that is where the CFO's office becomes the front line.

Both industries are import-dependent at their core. Cement manufacturing relies on imported clinker, limestone, slag, and gypsum; steel depends overwhelmingly on imported scrap. That makes both sectors hostage to three variables largely outside management control: the exchange rate, global commodity prices, and the cost and availability of trade finance.

The taka's depreciation over recent years has inflated raw material costs in local-currency terms faster than the market can absorb through price increases. Letters of credit, the lifeblood of import-based manufacturing, have periodically been difficult to open, and in the steel sector, the blacklisting of some local banks by international scrap suppliers has added another layer of friction. Meanwhile, policy interest rates near 10 per cent have pushed borrowing costs to levels that punish working-capital-intensive businesses; private-sector credit growth has fallen to historic lows, signalling how broadly investment appetite has been suppressed.

On top of this sits a heavy fiscal load. The cement industry pays customs duty on clinker alongside advance income tax on imports and sales, much of it effectively non-adjustable, which converts a tax on profit into a tax on turnover. In a year when margins are thin or negative, a non-adjustable AIT is not an advance at all; it is a cost. The Bangladesh Cement Manufacturers Association has rightly proposed rationalising the clinker duty to a specific rate and reducing AIT on essential raw materials. As a finance professional who has spent years resolving tax and VAT disputes through ADR, I can attest that predictable, adjustable taxation does more for revenue collection in the long run than aggressive upfront extraction from a struggling industry.

The demand side has been equally unkind. Public infrastructure spending, the single largest driver of cement and steel offtake, has slowed, with Annual Development Programme implementation falling to multi-year lows and the revised ADP itself trimmed under fiscal pressure. Private construction, the other engine, has idled under high interest rates and cautious sentiment. When both engines throttle back at once, the factories feel it within weeks.

For manufacturers, the practical consequences are unforgiving: prices at or below cost in periodic price wars, stretched receivables across dealer networks, rising energy costs, and fixed costs of large plants spread over shrinking volumes. In this environment, competitive advantage shifts decisively from the marketing department to the finance function. Cash flow discipline, working capital velocity, banking relationships that keep LC lines open through volatility, hedging of import exposure, energy efficiency, and relentless cost engineering, these are now the difference between the companies that will consolidate the industry and those that will be consolidated.

At Akij Resource, our cement and ispat businesses approach this period with exactly that discipline. Akij Cement has built its reputation on consistent quality and a strong distribution footprint; Akij Ispat serves the construction value chain alongside our ready-mix, asphalt, and building solutions businesses, giving the group an integrated view of the entire construction materials chain, from clinker to finished structure. That integration is itself a financial strategy: it smooths demand visibility, optimises logistics, and allows capital to be allocated to the strongest points in the chain. We treat this downturn not as a season to endure but as a period to build efficiency, deepen dealer partnerships, and prepare capacity for the upcycle that demographic and economic fundamentals make inevitable.

Bangladesh's per capita cement consumption remains among the lowest in the region, roughly half of India's and a fraction of China's, for the simple reason that most of our building is still ahead of us. Consider what is yet to be built: the housing stock for a rapidly urbanising population of 170 million; climate-resilient embankments and cyclone-proof infrastructure for the world's most climate-vulnerable delta; industrial sheds and economic zones as manufacturing diversifies beyond garments; and the roads, rail, ports, and power plants of a country targeting upper-middle-income status. The World Bank projects growth recovering towards 6.3 per cent by FY2026–27, and industry studies expect steel consumption to rise by 25 per cent as deferred infrastructure investment resumes. Every percentage point of that recovery is denominated, quite literally, in tonnes of cement and steel.

Urbanisation alone guarantees the trajectory. Bangladesh adds the equivalent of a mid-sized city to its urban population every year. Those citizens will need homes, schools, hospitals, mosques, and markets. The capacity our industries have already built is not a burden; it is a national asset waiting for its moment, built with domestic capital and employing hundreds of thousands directly and through the transport, dealership, and construction ecosystems.

First, revive public investment. Accelerating ADP implementation is the fastest, most direct stimulus available for the construction materials sector, and unlike many stimulus tools, it leaves behind productive infrastructure. Second, rationalise taxation: make AIT genuinely adjustable, replace the ad valorem clinker duty with a specific rate, and reduce duties on spare parts so that maintaining efficient plants is not penalised. Third, ensure trade finance flows: stable FX availability and functioning LC channels are existential for import-dependent manufacturing. Fourth, bring lending rates down as inflation eases, so that private construction, and private investment generally, can restart. And fifth, think regionally: with surplus capacity and improving logistics, Bangladeshi cement and steel can serve north-east India and beyond, turning overcapacity into export earnings rather than idle kilns.

Finance teaches you to distinguish between a liquidity problem and a solvency problem. Bangladesh's cement and steel industries face the former, not the latter. The fundamentals, demography, urbanisation, infrastructure deficit, and the entrepreneurial capacity so evident in the plants already built, are intact. What the industry requires is a bridge across this difficult interval: disciplined management from within, and enabling policy from without. Get that combination right, and the same kilns and rolling mills running at a third of capacity today will be the engines that pour and forge the Bangladesh of 2040. The nation's builders are ready. The materials are ready. What we must now construct, together, is confidence.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.