Bangladesh cement industry being one of the fastest-growing cement markets in the world has seen double-digit growth over the last decade. The per capita cement consumption has also increased following this trend from 95 kg (2011) to 187kg in 2018. This massive growth of the industry was backed by the massive infrastructure investment by the government, growing remittance income, rising urban population, and impressive GDP growth.
Sadly, those are all the good things that we all predicted and were happening for the Construction domain of Bangladesh. As the global economy has been hit hard by the recent COVID-19 outbreak, it is no surprise that the Bangladesh economy will follow the same fate. This means just like the Garments sector; a complete import base Cement production will also get a massive hit following the global crisis. Unlike the Garments sector, the cement industries are mostly local sales based. This implies a kind of similar but different challenge for the market to recover from the current crisis.
Following the global spread of the Coronavirus, Bangladesh had its first case on 7th March 2020. The market saw little to no effect in February; March was a real sales blockbuster for most of the local and multinational cement companies. Thus, if it were another normal year, April could have been another very high yielding month for all of the major players which eventually turned out to be a complete nightmare. At the start of April, the industry reported around 60%-65% reduction in cement production as the sales had plummeted from 25 lakh bags daily sale to only 5 lakh bags. That means most of the small grinding mills across the country are going to shut down during the monsoon season unless we see a quick comeback from the outbreak.
Dhaka Region Sales became the highest victim of Corona Outbreak while some sales are happening on a very limited scale outside Dhaka Market. Cement B2C Markets are heavily cluster based and the Dhaka key clusters like Mirpur, Narayanganj, Gazipur are among hotspots of corona affected areas unfortunately. Also, limited logistics contributed to this damaging party of the sector overall and at this panic level, engaging in construction works became a distant priority for the end-users.
B2B sectors which contributed significantly in managing the category’s steady growth with an accumulated project budget of more than 40 Billion US$ are experiencing the biggest sluggishness. Projects that are mainly categorized under two divisions infrastructures and energy are already slowed off Government’s focus on financial allocations has been shifted to manage this national crisis. Some of the G2G projects like Nuclear Power Plants, Matarabari Projects are still moving albeit at a very slow pace while all the infrastructure projects like Padma Bridge, the Padma Rail Link, the Karnaphuli Road Tunnel, the Greater Dhaka Sustainable Urban Transport Project (BRTA, Gazipur-Airport) are nearly at pause.
Since the industry is 100% import based, banking and port operations play key roles for the import and supply of raw materials. The recent country-wide lockdown has limited the bank operations which is affecting the transactional capacity of the Importers. Importers cannot open new LC (Letter of Credit) or debenture for importing essential raw materials from abroad. Limited hours banking, limited resources in Customs and Port Operation, higher turn-around time in local logistics altogether had made the tasks very daunting overall. Thus, queuing up vessels in Chittagong port has become the new normal.
So, what will be the aftermath? The situation will pan out how we collectively respond to this pandemic. In an optimistic manner, if we are able to contain the spread of the virus to a sizeable number then the industry may rebound after June 2020. The worst can be very dangerous for the Bangladesh economy along with the cement industry. I think with proper support from the government the industry will be able to sustain the upcoming monsoon. But it is an utmost necessity for the industry to turn around during the winter. If we follow what the global industry experts are saying then we see around 15%-20 % (predicted) reduction in the cement sales volume-wise.
We have also had a conversation with Chattogram port authority on what sort of measures they can take to facilitate imports or exploring how the government has further extended help to the export-import of industries. The port authority has lifted port charges - another measure to help the importers.
However, unlike the RMG this sector may not be the focus point of the Govt at this very time but a prolonged indifference to this sector can ask for huge damage for the entire economy resulting in perpetual sloth in GDP upswings. After re-open or partial release of lockdown, probable stimulus via policy re-structuring that could include Govt to come up with ease of import duty structure for raw materials, put some import benefits on LC opening through Central Banks, maintain close ties with other Governments for ensuring G2G projects are not dried up for lack of funds so to help of cement sales in large and infrastructure projects. In the consumer segment, continue to leverage affordable and further revised single-digit interest rates for housing and real estates and re-look the registration costs of real-estates and lands for keeping the gradual flow at post corona economy.
Today the entire situation is very shaky and vulnerable with no clarity for the upcoming rounds. The construction sector contributes more than 10% of the GDP; so, it cannot be taken out of sight for way too long. The sector is now pleading to the Government and other Authorities to extend help. We hope that the Govt will hear this and will not allow this sector to go down.