fourth Bangladesh International Trade Summit, an important platform for discussing the raw material needs of the steel and cement industries, has just concluded. The country's Minister of Industry, Nurul Majid Mahmud Humayun, said at the summit that demand for clinker in Bangladesh's cement industry is expected to soar to 25 million tons by 2027 as national infrastructure construction continues. This figure not only reflects the country's growing demand for cement, but also brings unprecedented challenges to the country's cement producers. In the face of rising
demand, Bangladesh's cement industry is facing serious problems in the supply of raw materials. According to Shankar Kumar Roy (Shankar Kumar Roy), Executive Director of Bangladesh Cement Manufacturers Association, Bangladesh's cement production is almost entirely dependent on imports due to the lack of important mineral resources, such as limestone, the main material for cement production. Manufacturers must import raw materials such as clinker, gypsum, fly ash and iron slag from neighboring countries. This highly import-dependent industrial model makes the cost of cement production completely subject to the fluctuation of raw material prices in the international market.
However, the tightening of the US dollar has led to rising prices of raw materials needed for cement production in the international market. Take clinker as an example, its price has risen from $41 per ton in 2022 to $45 per ton at present, an increase of nearly 10%. To make matters worse, the local currency of Bangladesh has continued to depreciate against the US dollar, and the situation has worsened. Moreover, the cost of issuing letters of credit for importers in this country is also rising. In the past, importers paid only 118 carles per dollar, but now the figure has risen to 122 carles. The combination of these factors has led to increasing investment in raw material costs by cement producers in Bangladesh, which has brought tremendous pressure to the industry as a whole.
In order to maintain normal production operations, cement producers in Bangladesh have to pass on these increased costs to consumers, which directly leads to the rise in cement prices . In the past year, the price of a 50 kg bag of cement has risen from 50 to 60 Carl, an increase of up to 20%. However, even so, cement producers are still struggling to make up for the losses caused by the increase in production costs. Many cement producers in Bangladesh are struggling to make a profit or loss because rising prices do not fully cover the increase in costs.
For smaller cement production enterprises, this pressure is even more difficult to bear. They not only have to face the rising cost of raw materials, but also have to deal with fierce competition in the industry. Data show that there are 37 active cement companies in Bangladesh, with a capacity of 58 million tons and a local demand of only 36 million tons (Bangladesh Daily Star, December 20, 2023). The four major producers, Shah Cement, Seven-Ring Cement, Fresh Cement and Premier Cement, control 62% of the total market. Excess capacity makes the living space of small production enterprises more and more narrow. With the rising cost of raw materials, the profit margins of these small production enterprises are further squeezed, and may even face the risk of bankruptcy.
