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Stiff competition drives out small cement makers

Kawsar Khan
More than 30 local cement factories, mainly small ones, faced closure in the last four years.
Industry insiders say these manufacturers have been driven out of the market by stiff competition and low domestic demand for the construction material.
Bangladesh Cement Manufacturers Association data show 29 factories operating now, while the figure was 63 in 2005.
These factories mushroomed at a time when there was robust demand for cement, with no single local player fully capable to reach every corner of the country, as those lacked wider marketing network and production capacity like the bigger players.
The big ones - local and multinational - arc in a better position because those can offer the item at prices much lower than the small ones can do.
"The closed factories were located outside Dhaka and mainly in border belts, cashing in on the easy supply of clinker, the prime raw material, from India. But die import of this raw material from the neighbouring country became pricey afterwards because of its high demand there", said Mostafa Kamal, president of the trade body for cement makers.
He said such a situation turned troublesome for the small factories, as those could not afford importing big consignments of clinker from
• Number of shutdown factories: 34
• Number of factories: 63
• Number of present operational factories: 29
• Annual production capacity: 20 million tonnes
• Annual domestic demand: 8.5 million tonnes
• Exports: 12,000-14,000 tonnes a month
China or Indonesia through water vessels as it cost huge.
Those factories also lag behind others who have adopted modern technologies and are equipped with testing laboratories.
Industry people in this context point to the spectacular success of bigger ones in exporting cement brands to the north-eastern Indian states, also known as seven sisters, despite a slump in the domestic demand.
In recent months, such exports have increased to around 12,000-14,000 tonnes a month from 8,000 tonnes a year ago.
While talking about the difficulties they face, Abdul Quayum Mia, executive director of Madina Group, said the trouble began in 2002 when bringing clinker by train or truck from India became difficult.
An official of Niloy Cement Industries Ltd, another small player, said the unit's production remained suspended for the last few years, as it could not make its product financially viable.
"But now we have rented our factory to a separate company who recently resumed operation", he said.
The sector people also pointed to the fact that lack of any market research before setting up such industrial unit threw many factories into financial trauma.
A sluggish construction work, both private and public, for the last three years is also blamed for the hard time for the small cement makers.
"Due to tlie low demand, most companies now use not more than 50 percent of their production capacity and are struggling to survive,” said the cement manufacturers association chief.
Mostafa Kamal urged the government to carpet public roads with cement concrete instead of pitch, as cement concrete roads last much longer than pitch roads.
Local manufacturers can produce around 20 million tonnes of cement annually against the demand for 8.5 million tonnes.
kawsar@thedailystar.net