cement industry in bangladesh

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An overview of Cement Industry


Cement is a hydraulic binder. That means it is a material which sets and hardens when mixed with water. The raw materials which go into the production of cement, primarily limestone and shale, are extracted from a quarry by blasting, or mining. They are then finely crushed and ground and transported to the plant, where they are stored and homogenized. The grinding process provides a fine powder known as raw meal, which is then preheated and then enters the kiln (A. Chattopadhyay, 2004). Flames reaching temperatures of 2000 C heat the material to about 1500 C, before drastically cooling it by air blasts. This burning process produces cement clinker, the basic material required for the production of cement. The clinker and gypsum (hydrated calcium sulphate) are finely ground together to obtain pure cement, which is also known as Ordinary Portland Cement (OPC). Secondary constituents are then added to make blended cement like Portland Pulverized fuel ash Cement (PPC) etc. Finally, the finished products are stored in large silos from where they are dispatched in bulk or in bags to where they will be used. (Cement Manufacturing Process. 2003)

The production of clinker does not take place in Bangladesh. This is because the country lacks the raw materials namely limestone and shale, for the production of clinker. Therefore, it is imported from countries like India and China. The cement manufacturing stage that takes place in Bangladesh is the grinding of clinker and gypsum together to obtain pure cement. Most of the grinding mills that are currently in production do this stage of the production, and then sell it in the market. OPC is used all over Bangladesh. (Habib, Haroon, 2003)


The cement market in Bangladesh consists of 100% supply in bagged cement. The dominant type of cement used in Bangladesh is Ordinary Portland Cement (OPC) (Heidelberg Cement, 2004). The clinker, a raw material used in the production of cement, is imported from other countries like India, Thailand, Malaysia and China. The country lacks limestonea major raw material required to make cement (A.Chattopadhyay, 2004). The only production stage performed in Bangladesh, to make cement, is importing the clinker and grinding it with gypsum to give pure cement. Other countries have integrated cement plant, which means that the cement is made from scratch to finish in the same factory. The factory doesnt need to import any raw materials for production. The clinker is manufactured in their facilities. The first cement factory in the country was Chattak Cement Factory, which was established in the early 1940 when Bangladesh was a part of India. This was the only integrated cement plant in the whole country because of the lack of raw materials. The factory had an installed capacity of 270, 000 tones per annum (TPA) when it was first installed. The factorys capacity was insufficient in the wake of implementation of rapid development in the construction sector (Invest, 2004). The first cement factory in the hands of the private sector was the Aynepur Cement Factory, which was established in 1992, had a capacity of 30,000 TPA. This was also an integrated cement plant, but it did not play any significant role in the cement industry because of irregular production and untrained management staff. Other than these two factories, there are no other plants in the country. (Islam, Sirajul, 2003) All other cement production facilities that are in operation today are clinker grinding units, facilities where imported clinkers are ground to produce cement. By 2002, there were as many as 56 cement grinding factories in the country with a total production capacity of 11.8 million tons (Habib, Haroon, 2003). As shown in table 1, the number of grinding mills doubled in just one year from the year 2000 to 2001. This shows that the entrepreneurs started feeling that there was profit in the cement industry, and therefore they started setting up their own grinding mills in the hope of making profit. (Murad, G.N, 2002)

There was not enough development of the cement industry, as compared to other countries, until 1990 because of government price control on cement and unfavorable import duty on clinker to promote the development of the industry in the country. After the year 1990, Bangladesh government changed its rules as it withdrew the price control, and had a favorable tax control for the imported clinker (A. Chattopadhyay, 2004). Many private industries started operating due to these favorable policies. The cement industry in the country began to develop after 1990, and 2001 was the most significant year for the industry (Habib, Haroon, 2003). In that year the number of installed grinding mills more than doubled from 20 in 2000 to 50 in 2001, which in turn almost doubled the production capacity, and paved way for surplus. This allowed Bangladesh to become self sufficient in cement production. Many multinational companies and entrepreneurs also started setting up their plants in the country because of the favorable duty structure imposed by the government for local production. Several cement importers changed their course, and started their own grinding mills. As illustrated figure 2, up till 2000, the demand for cement was greater than the production capacity. But after 2001, the production capacity increased tremendously, and therefore Bangladesh is producing cement surplus to its requirement.

Many local cement industries were setup starting 1997. Many investors saw the possibility of setting up plants. The gap in the demand-supply, low per capita consumption of cement, easy availability of bank credit and favorable government policies encouraged the companies to invest in cement (Hiedelberg Cement, 2004). This is where the banks came in. The banks did not have good investment opportunities, and therefore were in high spirits when it came to loan money to many investors in the cement sector. In this way, the banks also got a helping hand for their unused money (Meghna Cement Mills, 2003).

Bangladesh is also having a Free Trade Agreement talk with Sri Lanka, and the high commissioner showed keen interest in the Bangladeshi cement industry. As peace is

taking place in Sri Lanka, there may be a huge boom in the construction industry, creating a huge demand for cement. This means that Bangladesh may have good chance of exporting its surplus cement to Sri Lanka, and once it does that, the doors of other countries who lack cement industry, may also open up for Bangladeshi cement. (Dhaka, Colombo FTA. 2003)


The cement industry in Bangladesh is riddled with lots of problems, which are hindering its growth. Most of the companies hardly utilize 50 percent of their production capacities as the supply vastly exceeds the demand. The challenges, although have less impact on multinational companies, severely affect the local industries. (Cement industry beset by market situation, 2005)

Mismatch between Supply and Demand

The biggest problem probably faced by the companies is that they have the capacity to produce a lot more than what the country needs. Bangladeshs current demand for cement is around 65 lakh tons, whereas the companies have installed capacity of more than 135 lakhs (Heidelberg Cement, 2004). This forces the companies to underutilize their machinery, which in turn increases their costs and consequently creates economic loss for them. The local companies are much more affected because the general public prefers the produce from multinational cement companies over the local companies. The extra cement which is not sold could have been exported, but the local companies lack money and knowledge for the export. (Cement industry beset by market situation, 2005)

Obtaining Raw Materials

The main raw material used by the cement companies here is clinker. As Bangladesh does not have much source of clinker, the companies have to import it from other countries which include India, Malaysia and Thailand to name a few. Even if there are available sources, they are not of acceptable quality (Hussaini, Fakhri 1995). The price of clinker is on the rise, and this is why many local companies are on the verge of collapse. But the multinational cement companies are at an advantage because they import their own clinker. They just need to pay the import duty and taxes (Cement industry beset by market situation, 2003). They also have an advantage as the government allows them to import at a very low cost if the work is done for the government. But the local companies have to pay the import duty and also the price of the clinker. They also have to suffer if there is a delay in the imports as that results in a delay in production (Meghna Cement Mills, 2002).

Environmental Problems

Many local companies cannot afford adequate facilities to treat their industrial waste. Therefore, they dump all their waste materials in wrong places, which cause disruption to the ecological balance. Many new entrepreneurs dig up earth from land to construct the factories and grinding mills. These people do not employ geologists, like multinational companies do, and the digging has adverse effects both on the structure constructed above it, and also on the surrounding areas. The digging also threatens the structural integrity of many buildings (A. Chattopadhyay, 2004). The smoke comings from the chimneys of the factories are also untreated which cause air pollution. The multinational companies install filters and other equipments to treat the waste. Many times, they even reuse the waste.

Other Problems

There are lots of other small problems which bothers the cement industry in Bangladesh. One of th