Cement producers jittery over FDI

Kathmandu, Aug. 17

Cement Manufacturers Association (CMA) Nepal organised a discussion programme on challenges of the cement industry in the country last week where the producers tried to persuade the Minister for Industry, Commerce and Supplies Matrika Prasad Yadav and concerned departments of environment, forest, industry and standards to bar the Foreign Direct Investment (FDI) in the sector. 

Domestic cement producers recommended barring the FDI in the sectors on which the country is self-reliant. 

President of the CMA Dhruba Thapa said that the cement market in the country had been saturated, and inviting large investments in this sector could jeopardise the entire industry. 

“We will have become self-reliant in cement and by the end of 2020, we will have product surplus. Bringing in more FDI in large cement industry will be suicidal for the existing businesses and the newcomers as well,” he said to The Rising Nepal. 

Refuting that the large industry like Hongshi Shivam cement had caused the sudden downfall in the market price of cement, Thapa said that the uninterruptible power supply and decreasing price of coal – used as fuel and raw material – in the international market made the product cheaper. 

The price of coal has come down to US $70 from $115 a couple of years ago. Since the new industries had enjoyed both the opportunities, they offered the product in cheaper price, said Thapa. 

However, a private sector cement producer said that many Nepali producers were afraid of large investments like Hongshi and Huaxin Narayani. “Whatever may be their claim, entry of Hongshi in the market had forced them to lower the price of cement,” he said. 

But the Investment Board of Nepal (IBN), the facilitating agency for large-size FDI in the country, said that there were no chances of barring foreign investment in any industries in the country, including cement.

Chief Executive Officer of the IBN Maha Prasad Adhikari said that the FDI in cement will be open until the domestic product become competitive in the international markets in terms of quality and price.

There will be no bar on FDI in the cement sector, market and demand will decide whether we had enough investment, he said. 

“Local producers might have afraid of price reduction due to the entry of large and powerful players in the market. But, they must not forget that the quality product is always valued by the market. In addition to it, there are export potentials as well,” said Balaram Rijyal, Spokesperson of the IBN.

He also pointed out to the opportunities like rapid infrastructure development in the future. Following the CMA recommendations, the government is also mulling to build concrete-roads instead of bitumen-based blacktopped ones. 

Rijyal said that the entry of a single large manufacturer – Hongshi – had eased the supply of raw materials. It is supplying clinker to more than 40 cement industries in the country. Earlier they used to import the clinker from India. 

According to the CMA, by mid-July 2021, cement demand would reach 12.2 million tonnes per annum and the installed capacity of the industry will reach 25 million tons, thus creating more than half product surplus. 

The cement import has been reduced to 80,000 tonnes per year from 800,000 tons some years ago.

There are 61 cement industries in the country with 40 grinding plants and 21 integrated plants, with 15 million tonnes of installed capacity.

Published in The Rising Nepal daily on 18 August 2019.