Nepal Cement Industry Synopsis

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Cement Industry in Nepal has a very bright future and we have the resources. Yes, we have limestone mines of cement grade all over the country. As per the Dpet. of Mines and Geology, Nepal has limestone over 7000 sq.km of area. With proximity to two largest economies of the world, the cement industry in Nepal will surely boom exponentially. This is the right time to make a move in the cement industry in Nepal.

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Nepal Cement Industry Synopsis

  1. 1. Nepal Cement Industry Overview
  2. 2. National ScenarioCement consumption in Nepal has grown from a level of1.33 mio t in FY 00 to 3.28 mn tonnes in FY 11. Thecumulative average growth rate (CAGR) during this periodwas 8.6% pa. The CAGR during the past 3 years had beenvery high (14.9%), this is due to improved political stabilityin the country and investment in capacity building projects.The import of cement into the country has decreased from68% (0.90 mn tonnes) of the country’s consumption in FY00 to 22% (0.72 mn tonnes) of total country’s consumptionin FY 11. On the contrary, clinker imports have graduallyincreased and reached 1.32 mn tonnes in FY 11 fromnegligible (0.01 mn tonnes) in the year FY 00. If cementequivalent for clinker imported in Nepal is also considered,the cement imports remained over 70% over this period inNepal.
  3. 3. Chart below depicts the growth in cement consumption in Nepal.
  4. 4. Regional Demand: The regional dispersion for consumption in Nepal is given in the following table and chart:
  5. 5. The Central Region is the biggest cement market with an estimatedcement consumption of around 1.6 mn tonnes. This is due to developmentin and around the capital city (Katmandu), industrial hubs near thebordering towns with India and setting up of operational base bytrader’s near the entry points with India.
  6. 6. Cement Supply
  7. 7. The estimated FY 11 rated cement capacity in Nepal is 4.34 mio tpa (excluding closed plants). Out of this, 1.12 mio tpa is the rated capacity of the Integrated Units (IU) and 3.22 mio tpa is the rated capacity of the Grinding Units (GU). However, the plants are seen to not working at full capacity utilisation due to following reasons: Poor availability of grid power High captive power generation cost High cost of fuel (Coal and LDO) Low availability and difficulty in sourcing fuel (coal) Low labour efficiency Problems and issues created by locals Poor maintenance of plants Inefficiency/ poor plant technology in the old plants
  8. 8. On an average basis, IU’s and GU’s are working around 55% and 60%capacity utilization respectively.As mentioned earlier in cement equivalent terms, around 70% ofNepal’s consumption in FY 11 was met through imports, which takeplace from India.Indian players like Jaypee, Prism, Century, Birla Corp. ACC, Lafargeetc. supply cement from plants mainly located in the Bilaspur andSatna clusters. In case of clinker, major players supplying clinkerincludes Shree, Prism, Jaypee.
  9. 9. Present Demand Supply Gap: Despite Nepal having an rated cementcapacity of about 4.34 mtpa, the plants are seen to produce around 2.56 mntones in FY 11. The balance cement (0.72 mn tones) requirement was importedfrom India.
  10. 10. Market Shares: The market shares of local players in Nepal for FY 11 is given in the following chart. Jagdamba is the market leader with 12 % market share followed byVishwakarma with 10% market share. Other Nepal players have less than 5% market share.
  11. 11. Chart: Cement supply share by Indian players Imported cement has 22% market share in Nepal, share of these players is depicted in the following chart: Jaypee leads amongst the Indian players with 47% supply share to Nepal followed by Century and Prism with 13% supply share each.ACC has 12% supply share. Other players are with 5% or less supply share in imports.
  12. 12. FUTURE OUTLOOK
  13. 13. Cement Consumption: Future cement consumption has been forecasted using following methodology.Future cement consumption has been worked out under 3different scenarios viz most likely, optimistic and pessimistic.Future cement consumption under the 3 scenarios is shown inthe following chart:
  14. 14. Future Cement Consumption: From a level of 3.3 mn tonnes in FY 11,cement consumption is likely to reach around 4.7 mn tonnes in FY 15 and 8.1 mn tonnes in FY 21.Figures in million tones
  15. 15. Expected New Local Companies:The estimation of future capacity additions have been made based oninteraction with cement manufacturers and importers. Following table depicts the capacities under the most likely scenario:Region Plant Location Typ Rated Cement Commissionin e Capacity (mn g Year tonnes)Central Shivam Makwanpur IU 0.26 FY 12 CementCentral Unitec Birganj GU 0.17 FY 14 CementEastern Maruti Cement Siraha IU 0.13 FY 13 ExpansionEastern Nigali Cement Dhankuta GU 0.05 FY 12
  16. 16. Region Plant Location Typ Rated Commissionin e Cement g Year Capacity (mn tonnes)Mid- Dang Dang IU 0.50 FY 16Western CementMid- Ghorahi Dang IU 0.33 FY 13Western CementMid- Sonapur Dang IU 0.23 FY 13Western CementWestern United Lele IU 0.25 FY 15 CementWestern Chaudhary Ridi CU 0.45 (only FY 15 Group clinker)Western Chaudhary Butwal GU 0.33 FY 14 GroupWestern Dynasty Kapilbastu IU 0.13 FY 13 CementWestern Jagadamba Rupandehi GU 0.20 FY 14 Cement Expansion
  17. 17. Effect of Power Crisis on Cement Industry Currently Power Crisis in Nepal has limited the effective capacity for the local players. Few GU’s have shifted to diesel based gensets, however their running cost are high. It is expected that the power situation would improve gradually as new Hydro Projects come onstream. Also some of the new capacities are likely to have captive power plant to take care of the power outage. Thus, the capacity utilization is expected to increase in coming years. Based on the above, the capacity utilization has been gradually increased in the coming years. The effective capacity utilisation is envisaged to increase from 55 % to 100 % for existing IU’s and 59% to 85% for GU’s in another 6-7 years on account of improved power situation and local issues resolved.
  18. 18. The rated and effective capacity in Nepal for future years is given in the following table:Year Rated Capacity (mn tonnes) Effective Capacity (mn tonnes)FY 11 4.34 2.56FY 12 4.65 2.93FY 13 5.48 3.76FY 14 6.17 4.56FY 15 6.42 5.11FY 16 6.92 5.94FY 17 6.92 6.24
  19. 19. Year Rated Capacity (mn tonnes) Effective Capacity (mn tonnes)FY 18 6.92 6.32FY 19 6.92 6.32FY 20 6.92 6.32FY 21 6.92 6.32
  20. 20. Future Consumption – Supply Gap: The most likely consumption - supply gap has been calculated based on the estimated most likely future consumption and most likely future supplying capacity. This is shown in the following chart:Figures in MTPABased on effective supply capability, there is likely to be deficit of cement up
  21. 21. Report Prepared by: GEETA INVESTMENT SERVICES Avdesh Mandal avdlink@gmail.comavdesh.indrayani@gmail.com +9779803384110 +919999504397 Sources: National Construction & Building Materials, INDIA Cement Manufacturers Association of Nepal Department of Industry, Govt. of Nepal

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