Bangladesh: finding ways to make profits

ICR's January 2019 issue starts the year with a market report on the Bangladeshi cement market. The country has just recorded its highest cement sales in 2018 at 33Mt, while cement demand grew by an impressive 12 per cent YoY, according to MD Shahidullah, vice president of the Bangladesh Cement Manufacturers Association.

However, with 43.5Mta of capacity available from more than 32 cement producers in 2017, the industry is still burdened with low utilisation rates and growing overcapacity. Moreover, Bangladesh saw a sharp rise in raw material prices while the price of imported clinker also increased due to the scarcity of supply from Vietnam. Costs were exacerbated by the 6.25 per cent devaluation of the taka against the US dollar and this forced manufacturers to introduce price hikes in March 2018, after six years with no increases.

Mounting distribution challenges were also part of the local operating environment. For example, Anwar Group's trucks now carry just 12t of goods, compared to 25t previously, following a load restriction. To reduce pressure on the country's road network, cement producers want to move more cement and raw materials onto rivers, but more barges are required.


Adapt and prosper
Bangladesh Cement producers are also having to find more efficiencies and energy savings. While MI Cement reported a 33 per cent rise in revenue in FY17-18, its net profit fell by more than 52 per cent. This is despite being the country's largest cement exporter, delivering 7000-10,000tpm to Tripura and other Indian provinces.
 The company reported a rise in selling, distribution and energy costs as well as being negatively impacted by the devaluation of the taka.

Domestic manufacturers, which have a share of around 80 per cent of the local market, are not only having to become more efficient, they also have to hold their own against four multinationals – HeidelbergCement, LafargeHolcim, Shun Shin Cement and Siam City Cement. 

Sonar Bangla Cement, for example, is a local producer that operates a 2Mta grinding plant in Murhisabad district, West Bengal. It predominantly manufactures Portland pozzolana cement, supplying eastern India  as well as northern and central India – mainly by rail (55 per cent) but also by road (45 per cent). Having recorded cement production of 1.72Mt in 2015-16, the company has seen output fall to 1.55Mt in 2017-18. But as a means to lower clinker usage, fly ash addition has risen from 32.1 per cent in 2015-16 to 34.8 per cent in 2017-18. Meanwhile, specific power consumption of cement grinding has been reduced from 32.29kWh/t of cement to 29.3kWh/t of cement in 2017-18.

Turning to vertical roller mills (VRMs) and slag grinding
Foreign investor Shun Shin Group has established a foothold in Bangladesh with its subsidiary, Seven Rings Cement and is among many producers in the country that have started a trend towards VRM technology. It will add a 1.2Mta VRM in Chittagong City and outside Bangladesh, the group is expanding with a 1Mta slag VRM grinding unit in Dubai Industrial Park, Jebil Ali Industrial Area, UAE, where ground granulated blastfurnace slag (GGBS) will be produced from 4Q19 to cover demand in Greater Chittagong and Noakhali.

VRMs are reducing energy costs and improving opportunities to manufacture increased volumes of slag cement. MI Cement installed a Loesche VRM at its Munshogonj grinding plant in 2017 and Meghna Cement Mills Ltd (Bashundhara group) added an OK™ 54-6 VRM in its Mongla plant at the end of 2018.

Outlook
Bangladesh's cement sector is shaping up to be an intriguing market place in 2019. The country has  major construction projects such as the Padma Bridge, Metro Rail and Dhaka Elevated Expressway that will boost cement demand, while urbanisation is occurring at a rapid rate in Dhaka. Per capita consumption is very low at 131kg (GCR12), so there is a great deal of potential in the domestic market. 

The expansion plans by Shun Shin Group, Meghna Cement, Bushundhara Cement and Siam Cement as well as the re-positioning of LafargeHolcim, which has consolidated its Bangladesh subsidiary, is the prelude to the rush to be at the front of the queue when cement capacity utilisation rates recover and better margins return to the sector.

ICR's January 2019 issue has a full interview with Masud Khan, CEO of MI Cement, and a market review of the Bangladesh cement sector.

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