Bangladesh's cement sector, which is mostly import-dependent for raw materials, is facing serious trouble due to the Middle East (ME) conflict as increased freight charges have led to higher operational costs.
However, manufacturers cannot pass the cost on to the retail level in proportion to their extra cost as they think this is a coping mechanism for their survival, industry insiders say.
According to them, this is a bolt from the blue at a time when the sector was eyeing a turnaround from several years of de-growth.
They were awaiting a recovery with the newly elected government assuming power in February this year.
Unfortunately, the last day of February marked the beginning of the Middle East tension with the US-Israel attacks on Iran.
Contacted, Bangladesh Cement Manufacturers Association (BCMA) President Mohammed Amirul Haque said the surge in petroleum prices was driving up shipping costs, leading to an increase in the price of every raw material.
"Consequently, due to the escalation of overall expenses, including freight charges, the price of clinker - previously $45 - has risen to around $53," he said, adding that the prices of other items increased at varied rates.
Clinker is the prime raw material for cement production, while other ingredients include gypsum, limestone, slag, fly ash, and silica.
Of them, clinker is mostly imported from Thailand, Indonesia, and Vietnam.
The imports now require higher freight costs due to the impact of the Middle East conflict.
Mr Haque, also the managing director of Premier Cement, said the global economic situation had caused widespread inflation, which was why the price of coal required for clinker production had increased and limestone imports from the Middle East were facing disruptions.
"Overall, expenditures have escalated by approximately 30 to 40 per cent, but manufacturers have not passed it on to the retail level proportionately," he said.
He also said prices had not risen due to stiff competition and a lack of market demand, meaning producers could not pass the increased costs on to dealers, retailers, and subsequently, to consumers.
To survive and remain cost-effective, producers would need to pass another Tk 50 on to the market, he said
Mahfuz Noman, a retailer in the capital's Mohammadpur area, said the price of a 50kg cement bag rose by Tk 30-40, depending on brands.
Each bag of cement sold between Tk 490 and Tk 550 last week, he said.
"The demand for cement, as well as other construction materials, is much lower now," he also said, adding that the theory of price fluctuation based on demand and supply did not apply to construction materials. "When people are in a position to buy construction materials, they do not hesitate about pricing," said Noman.
He said higher inflationary pressure, geopolitical tension, and the end of the dry season could be the reasons for the downturn.
According to sources, some 40 million tonnes of cement were sold in the last calendar year, a slight recovery following a continuous decline for the previous three years (2022-2024).
Cement plants in the country are still operating much below their production capacity of nearly 86 million tonnes per year.
There are around 40 companies in the sector, creating direct employment for 60,000 people and indirect jobs for over a million.
saif.febd@gmail.com
