With investments pouring in, cement producers fear supply glut

Published On: April 1, 2019 11:08 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, April 1: Cement manufacturers have opined that there is no need of new investment in cement and clinker production. 

They are worried that the rise in investment without any growth in consumption will adversely impact the country’s cement industry.

The concerns of cement manufacturers come in the wake of the government’s efforts to woo foreign investors, most recently by organizing the ‘Nepal Investment Summit 2019’. While the government is sparing no effort to bring foreign investment, cement manufacturers have stood in favor of discouraging new investment in production of cement and clinkers in the country.

Dhruba Raj Thapa, president of Cement Manufacturer Association of Nepal (CMAN), told Republica that they were worried about the fate of additional investment in cement production at a time when the country has already become self-reliant in this construction material. He also informed that import of clinker has also stopped for the last few months due to increased domestic production.

“Cement produced by the industries currently in operation is adequate to meet the demand for the next 10 years,” said Thapa. “If investment continues to pour in this sector, all industries have to lower their capacity utilization by a half,” he added.

While there is a possibility of exporting surplus production, Thapa contends that it is difficult to export cement to the Indian markets. According to Thapa, cement production in India is already higher than its local demand.

“The cost of production in India is low and they are producing cements at cheaper prices. It will be difficult for us to get the Indian market when India is already producing cements surplus to its requirements,” he said.

Coal import, problem related to mines and labor issue, among other factors, have increased the cost of production of cement in Nepal, according to Thapa.

Tara Prasad Pokharel, the general secretary of CMAN, also said that investment in cement industry in Nepal has gone up massively over the past one and half decades. If the current trend of investment continues, all cement industries will have to lower their capacity utilization very soon, he added.

According to Department of Industries, 114 cement factories, both government-owned and private, have been registered so far with an estimated investment of over Rs 200 billion.

Pokharel said that only 68 registered industries are currently in operation. They produce PPC, OPC and OSC cements.

According to Pokharel, 26 industries will produce an estimated 8.55 million tons of clinkers in the current fiscal year 2018/19, while 2.7 million tons will be added in the next fiscal year and another 5.55 million tons in FY2020/21.

Demand for cement in FY2017/18 was 9 million tons annually. It is estimated to rise by 15 percent to 10.35 million in the current fiscal year and 15.74 million in FY2019/20. Nepali cement industries have combined production capacity of 23.74 million tons annually.

Cement manufacturers say that cement production is estimated to be 100 percent higher than the demand in the next fiscal year if all industries that are currently in operation or under construction run in full capacity.

Pokharel said that the glut of production will have an adverse impact on cement manufacturing sector if the investment continues to pour in.

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