Competition choking small cement makers

Rising  freight rates globally for demand recovery and supply disruptions as  well as an increase in transport costs locally owing to a hike in diesel  prices have made it difficult for small-scale cement manufacturers to  compete in Bangladesh.

"Small-scale cement makers are facing acute  competition from their more established counterparts as there is  over-manufacturing in the industry," said Syed Kamruzzaman, company  secretary of Aramit Cement.

The company currently has a low  production capacity and so its main market is restricted to Chattogram  and its adjoining districts.

"If we expand our market, it would not be commercially viable," he said.

Regarding the recent market scenario, Kamruzzaman said sales fell slightly in the last quarter due to a lower number of orders.

With  this backdrop, he alleged that the Bangladesh Cement Manufacturers  Association (BCMA) is a practically non-effective organisation as it  does not play its due role in favour of cement makers.

"The  shipping cost was $17 per tonne just a month ago and it has since  increased to $24 per tonne," Md Alamgir Kabir, president of the BCMA,  said on February 15.

This has had factories doling out more money  for production, the BCMA said in a statement, adding that it would not  be possible for cement makers to sustain losses for a long time.

A  senior official of Royal Cement, on condition of anonymity, said since  large manufacturers want to grab the market, small manufacturers are  struggling to survive.

He alleged that the BCMA decides to adjust  prices to ensure their survival but large manufacturers do not follow  the decision as they are capable of running their business at a minimum  profit margin. However, the same is not possible for small  manufacturers.

Nine large companies -- Shah Cement, Bashundhara  Cement, Fresh Cement, Premier Cement, Seven Rings Cement, Crown Cement,  LafargeHolcim Bangladesh, HeidelbergCement Bangladesh, and Akij Cement  Company -- collectively control 85 per cent of the domestic market.

The remaining 15 per cent is catered to by other manufacturers, said the official.  Mohammed  Amirul Haque, managing director of Premier Cement, said manufacturers  will have to make commercial adjustments as shipping costs are  increasing.

Regarding the sufferings of small-scale manufacturers,  he suggested improving their business strategy and reducing production  costs.

However, he does an issue with the struggles of small-scale  operations as they entered the sector to do business but have seemingly  done so without conducting any research beforehand.

Haque sees a  good future for the cement sector as consumption will increase in rural  areas along with rising urbanisation and economic development.

Md  Shahidullah, managing director of Metrocem Cement, said small  manufacturers are facing difficulties to keep their businesses afloat  due to high competition in the industry.

If small manufacturers  intend to continue operations, they will have to increase their  capacities through investment or mergers with other manufacturers.

"My  business is an example as it is at the point where we would need to  merge to survive. However, I will not merge. Instead, I will try to run  it at any cost," he added.

Despite the industry's growth,  Bangladesh is still one of the lowest consumers of cement products in  the world with per capita cement use standing at 200 kilogrammes.

There  are 37 active cement factories in Bangladesh with a combined annual  production capacity of 58 million tonnes against the local demand of 33  million tonnes.

Annual consumption stood at about 33.4 million  tonnes in the fiscal year of 2020-21 and is forecast to increase by high  single digits in the current fiscal year.

According to the annual  report of LafargeHolcim Bangladesh, construction activities have  returned to normalcy across the country with most projects and the  individual housebuilder segment picking up pace.