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Cement makers still on slippery ground

  • Published at 01:20 am December 24th, 2020
Bangladesh's cement industry at a glance

The sector's business returned to some extent since the reopening of the economy on May 30 but the spike in rod prices has thrown its recovery into jeopardy

For the cement industry, the journey back to the pre-pandemic level is proving to be a trudge.

Between January and August, the sector, which has been riding the recent construction boom, saw degrowth of about 7.7 per cent, as economic activities slammed shit for two-and-a-half months from March 26 thanks to the countrywide shutdown announced to flatten the curve on coronavirus.

“Our business suffered terribly in the first six months of 2020 and many fell into trouble,” said Md Alamgir Kabir, president of the Bangladesh Cement Manufacturers Association (BCMA).

The sector witnessed a degrowth of about 13 per cent in the first five months of 2020, according to data compiled by the industry. 

The shutdown was lifted on May 30 and the economy slowly started opening up from July.

But the cement sector’s fortune did not turn around immediately. It recovered to some extent but it did not return to normal.

“If the situation stays this way, we are hoping our business will return by the first quarter of 2021,” Kabir said.

The consumption of cement sector was supposed to rise this year though, fuelled by the ongoing mega projects like Padma Bridge, Metrorail and Karnaphuli Tunnel.

But the pandemic played the spoilsport.  

The slump in cement sales in Bangladesh is in line with its South Asian neighbours, where the sector is expected to witness a 10 per cent negative growth in 2020, as per the International Finance Corporation. 

The global cement demand is expected to shrink 3 per cent year-on-year when China is included and 6.4 per cent when excluding China, the study found. 

Now, the rise in rod prices is posing a threat to the sector’s turnaround as it will impact construction decisions, said Kabir, also the vice-chairman of MI Cement. 

“If the prices go up, construction would be hit hard and the cement sector will bear the brunt of it,” he added.     

The price of 60-grade MS (mild-steel) rods increased to Tk 64,000 per tonne from Tk 54,000 a month ago on the back of the rise in the price of steel scraps in the global market. 

The economic recovery would not happen overnight and it will take time, said Mohammed Amirul Haque, managing director of Premier Cement. 

“We are lucky that our economy was not impacted as deeply as our South Asian peers’ were or even the EU economies or developed countries.”

So cement consumption will bounce back with the return to normalcy following the COVID-19 inoculation.

“For now, we are bleeding.”

Subsequently, Haque called for financial as well as policy support to remain afloat.   

The government should convert loans of the sector into term loans and extend the moratorium period to give a cushion against the crisis. 

“A proper financial plan is a must as without it no sector would be able to recoup the pandemic losses,” he said, while calling for a reduction of import tax for raw materials for a certain period.