Bangladesh industry consolidation gathers pace

Bangladesh industry consolidation gathers pace
07 August 2012

Cement sector consolidation in the Bangladesh industry is set to gather pace as more than 70 smaller cement factories have folded operations in the past 12 years having lost ground to larger players.

According to a report in the Financial Express (Bangladesh) more are on the verge of shutdown as tight bank loans for smaller factories and massive investments by local and global players have accelerated the closure of units with capacity below 6000t.

"It's like a story of big fish gobbling up smaller ones," President of Bangladesh Cement Manufacturers Association (BCMA) Mostafa Kamal told the FE. Despite demand increasing on the back of a construction boom, many small factories were closed as they could not expand or modernize their factories.

Abdul Quayum Miah, a BCMA leader, said currently 29 factories are producing 20Mt of cement, far outstripping a demand of 14-15Mt. He added that the excess capacity may lead some producers to reduce prices but others could be considering price increases after the government raised import duty on clinker which will increase from BDT350 to BDT500 under the current budget.

He also said low-capacity factories have already shutdown their operations and many existing ones with a capacity of 1200t or below may face closure.

"Only big and technology-driven companies will ultimately survive," he said, predicting top seven to 10 companies would dominate the market in the coming years.

Mr Miah said foreign companies are enjoying only 20 per cent market share and the rest 80 per cent are held by local players. Out of total production, 60 per cent cement is consumed in Dhaka, 20 per cent in Chittagong and the rest in other divisions, according to BCMA data.

Published under Cement News