Cement demand plummets as public projects lie dormant

Sales of cement nearly halved in the last couple of months as real estate developers shelved construction plans while public projects came screeching to a halt in the face of nationwide unrest and the sudden political changeover.
According to industry insiders, dwindling sales of the major construction material have had a notable impact on the industry, with difficulties mounting for cement producers.
“Due to the student movement and sudden change in the political scenario, the demand for cement declined by nearly 50 percent compared to usual,” remarked Iqbal Chowdhury, chief executive officer of LafargeHolcim Bangladesh Limited (LHBL).
He added that a lot of public projects were halted because contractors that were appointed to implement them had absconded after the Sheikh Hasina-led Awami League government was ousted by a mass uprising on August 5.
As such, demand for cement from the public sector, which accounts for 35 percent of annual cement consumption, has plummeted, Chowdhury said.
Demand from the real estate sector has also reduced since they are not undertaking new projects as sales have declined due to high interest rates for home loans.
Similarly, individuals who were thinking of constructing buildings have also postponed such plans due to the sudden change in the political situation.
Chowdhury further said the demand for cement in public infrastructure projects would not increase as the interim government will not implement any new infrastructure projects.
So, the cement sector will witness a dull period for a long time although most big manufacturers expanded their production capacity, he said.
Chowdhury added that cement companies were owed huge sums by contractors, but they could not pay because they could not get their own bills cleared by the government.
According to the Bangladesh Cement Manufacturers Association (BCMA), cement sales declined by over 3 percent to 25 million tonnes during January to August this year compared to 26 million tonnes in the same period last year.
The BCMA added that cement makers logged insignificant revenue in July and August, adding that it would take time for the business to return to normalcy.
According to the association, local producers collectively churn out about 78 million tonnes of cement each year against demand for around 40 million tonnes.
Mohammed Amirul Haque, managing director of Premier Cement Mills, said sales had declined to 2.5 lakh tonnes at present from 4 lakh tonnes in a normal situation.
As demand has fallen substantially, the company has scaled down production. Usually, it produces around 4.5 lakh tonnes of cement per month. But it has cut back to just 2.7 lakh tonnes at this moment.
However, Haque was optimistic that demand for cement would grow alongside remittance inflows as cement consumption is higher in rural areas than in urban areas due to rapid urbanisation.
He believes sales will grow in the winter season, opining that individuals will start constructing buildings when the overall political situation stabilises.
Md Moshiur Rahman, chief executive officer at Akij Cement Company Ltd, said sales had reduced as public projects remain halted.
Many of the contractors that were hired for government projects had close links to the previous regime and fled the country after the political changeover, he said.
“Moreover, others are not working due to fear. Another reason is that there is no guarantee that they will be paid for any completed work,” Rahman said.
On the other hand, there are no plans at present to implement any more mega projects, so demand for cement will not increase from the government’s side, he added.
He further said the interim government had put restrictions in place regarding lifting sand from sand quarries, which was also affecting the cement sector.
“We reduced production to 1.45 lakh tonnes per month from 2.10 lakh tonnes due to slow demand,” Rahman added.
According to Akij Cement’s CEO, they now supply 4,200 tonnes per day compared to 6,500 tonnes in the past, which indicates that sales have declined by 35 percent.
Against this backdrop, Akij Cement has been facing losses amounting to Tk 3.6 crore on average per month over the past few months, he said.