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  • 1. STUDENT DECLARATION We are Group-Dynamite hereby declare that the work presented report titled of International Business in Cement industry. This is prepared by our group and have not been previously submitted to any other University, College or Organization for an academic qualification, certificate, diploma or degree. We hereby warranty that the work, we have presented does not breach any existing copyright. ------------------ Signature ID No :110204156 – Md. Asif Abdullah Himon ID No: 110204180 – Md. Abdullah Al Noman ID No: 110204198 – Saiful Islam Emran ID No: 090203132 – Al Amin International Business Sec: B Bachelor of Business Administration Northern University Bangladesh
  • 2. CERTIFICAT OF ACCEPTANCE This is to certify that the annual report entitled “International Business practices of Cement industry of Bangladesh” is prepared by our group under our supervision for partial fulfillment of the requirement for the undergraduate of Bachelor of Business Administration, Northern University Bangladesh So far we know this report is prepared by our group and is not copied or borrowed from anywhere without proper acknowledgement. Supervisor Chairman Tasneem Tarannum Dr. Lecturer, DBA Dean of Business Administration Northern University Bangladesh Northern University Bangladesh
  • 3. Date November 23-2013 To Tasneem Tarannum Lecturer Department of Business Administration Northern University Bangladesh Sub: Submission of Term paper In accordance to your advice to prepare a term paper “International Business practices of Cement industry of Bangladesh” .We has done our report and prepares a term paper with the best. We have followed all of the slandered methodology and your advice to prepare a term paper. We have also taken help from different sources to prepare a term paper properly and accurately. We hope this term paper will fulfill all the requirements suggested by you. We believe that this program has enriched both of our knowledge and experience. It gave us immense pleasure to complete the report on Cement industry as requirement. We tried to highlight the important issues of the assigned company’s perspective. The report provided us insight on the real life. I would be happy to respond any question that we might have regarding this report. Sincerely …………………………….. (Md. Saiful Islam Imran)
  • 4. Introduction Bangladesh cement industry is the 40th largest market in the world. Currently capacity of the industry is about 20 mn tons (MT). Top 13 players are alone controlling over 78% of the total industry capacity. However, the balance capacity still remains quite fragmented. Per capita consumption remains poor when compared with the world average; only 65 kg (FY2012) while our neighboring countries, India and Pakistan, have per capita consumption of 135kg and 130kg respectively. This underlines tremendous scope for growth in the Bangladesh cement industry in the long term. Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. For that reason, industry is regional in nature. It’s also seasonal in nature, during Monsoon industry suffers from low demand. Cement is the latest addition in the list of export commodities in Bangladesh. Our country started exporting cement from January 2003. Earlier, apart from some production of state-owned Chatak Cement Factory, the country was dependent on its import. In this context, local investors took the initiative for setting up cement factories and starts producing cement in 1992. The production in eight private factories stood 34 lac tons in 1997, So far, about 100 Factories got government’s approval of which 56 factories are on production with a production capacity of 1.30 crore metric tons against a domestic demand of 60 lac tons in a year. Beyond the border Research shows that there is a 12 percent increase in domestic demand of cement every year. But the investors cannot rely on only the domestic demand of the cement. They have to look for markets abroad. It is understood that there is no way to get the market abroad without producing international standard quality cement. Cement Industry: Global Scenario World production of cement is 2.6 billion tons/year (FY2012). The world production of cement is dominated by China (1,400 mn MT), followed by India (260 mn MT), United States, Japan
  • 5. and Russia. Other countries featuring prominently on the global cement space include Spain, South Korea, Italy, Iran, Turkey, and Brazil. Significant capacity expansions in China, India, Saudi Arabia, UAE, Turkey, Egypt, and Brazil are underway and planned for the next few years. China and India, together account for more than 50% of the total cement produced and consumed in the world. Developed markets including the US, Western Europe and Japan are mature and currently facing declining demand due to the global economic crisis. The largest global players are Lafarge (France), Holcim (Switzerland) and Cemex (USA). In terms of cement production, Bangladesh ranks about 40th in the world. According to Global Industry Analysts, Inc., global demand for cement is forecasted to rise 4.1% per year and reach to 3.5 billion metric tons in 2013. Gains will be fueled by rising investments in infrastructure among the developing countries of the world, driven by economic growth and increasing per capita income levels. Cement Industry Overview Development of cement industry in Bangladesh dates back to the early-fifties but its growth in real sense started only about a decade. The country has been experiencing an upsurge in cement consumption for the last five years. Government gave permission for establishing cement industries in Bangladesh in FY1995. Initially the cement industry took place without the proper analysis of the demand and supply of cement in the country. Within the span of the two to three years, industry attained expanded capacity of the product with stable growth rate of consumption. There were mainly four dominant players in the cement industry in the year 1998 that produced their own cement to meet the demand of their customers. These companies were:
  • 6.  Meghna Cement (owned by Bashundhara group)  Eastern Cement (currently known as Seven Horse)  Chatok Cement  Chittagong Cement (taken over by Heidelberg where the local brand is called Ruby) After a decade, currently 123 companies are listed as cement manufacturers in the country. Among them 63 have actual production capacity while 32 are in operation. The current installed capacity of the industry is 20.0 mn MT. This installed capacity has been calculated under two conditions below: 1. All factories are in operation 2. Production is at its peak season Though the installed capacity is 20.0 mn MT, currently the acutal capacity is about 13.96 mn MT due to supply constraints for power and clinkers Market size derivation Total demand (mn MT) 13.93 Standard Price per beg (BDT) 350 Total Market size (BDT mn) 97,510 Total Market size (USD bn) 1.35 Raw materials for cement manufacture The first step in the manufacture of Portland cement is to combine a variety of raw ingredients so that the resulting cement will have the desired chemical composition. These ingredients are ground into small particles to make them more reactive, blended together, and then the resulting raw mix is fed into a cement kiln which heats them to extremely high temperatures.
  • 7. Since the final composition and properties of Portland cement are specified within rather strict bounds, it might be supposed that the requirements for the raw mix would be similarly strict. As it turns out, this is not the case. While it is important to have the correct proportions of calcium, silicon, aluminum, and iron, the overall chemical composition and structure of the individual raw ingredients can vary considerably. The reason for this is that at the very high temperatures in the kiln, many chemical components in the raw ingredients are burned off and replaced with oxygen from the air. Table 3.3 lists just some of the many possible raw ingredients that can be used to provide each of the main cement elements. Table: Examples of raw materials for Portland cement manufacture Calcium Silicon Aluminum Iron Limestone Clay Clay Clay Marl Marl Shale Iron ore Calcite Sand Fly ash Mill scale Aragonite Shale Aluminum ore refuse Shale Shale Fly ash Blast furnace dust Sea Shells Rice hull ash Cement kiln dust Slag Production During the year2012, the Company was able to produce a total of 162,445 metric tons of cement, which was 77.35% of installed capacity as against 136,713 metric tons in 2011 which showed 19% increase compared to last year. In fact, production largely depends on demand and it could have been increased in demand of cement in the market was more. However, achievement of production is appreciable in respect of capacity of machinery and present requirement of local market. Productions of the last five years have been summarized in the following table: Comparative Statement of Production Particulars 2012 2011 2010 2009 2008 Installed Capacity (in metric tons) 210, 000 210, 000 210, 000 210, 000 210, 000 Actual Production (in metric tons) 162,445 136,731 127,581 138,248 119,383 Capacity Utilization (in %) 77 65 61 66 57
  • 8. It appears from the above that production of cement has been increasing gradually from the year 2008 to 2012 and slightly decreased in the year 2010, which reflects gradual improvement of production performance of the Company. Production method Basically, cement is produced in two steps: first, clinker is produced from raw materials. In the second step cement is produced from cement clinker. The first step can be a dry, wet, semi-dry or semi-wet process according to the state of the raw material. Making clinker: The raw materials are delivered in bulk, crushed and homogenized into a mixture which is fed into a rotary kiln. This is an enormous rotating pipe of 60 to 90 m long and up to 6 m in diameter. This huge kiln is heated by a 2000°C flame inside of it. The kiln is slightly inclined to allow for the materials to slowly reach the other end, where it is quickly cooled to 100-200°C. Four basic oxides in the correct proportions make cement clinker: calcium oxide (65%), silicon oxide (20%), alumina oxide (10%) and iron oxide (5%). These elements mixed homogeneously (called “raw meal” or slurry) will combine when heated by the flame at a temperature of approximately 1450°C. New compounds are formed: silicates, aluminates and ferrites of calcium. Hydraulic hardening of cement is due to the hydration of these compounds. The final product of this phase is called “clinker”. These solid grains are then stored in huge silos. End of phase one. From clinker to cement: The second phase is handled in a cement grinding mill, which may be located in a different place to the clinker plant. Gypsum (calcium sulphates) and possibly additional cementations (such as blast furnace slag, coal fly ash, natural pozzolanas, etc.) or inert materials (limestone) are added to the clinker. All constituents are ground leading to a fine and homogenous powder. End of phase two. The cement is then stored in silos before being dispatched either in bulk or bagged.
  • 9. Economic impact of cement industry in Bangladesh In Bangladesh, there are around 55 cement-manufacturing companies, most of which are in operations either on a large or small scale. A total of 34, including multinational cement manufacturers, are in commercial production. The installed production capacity of the 34 cement factories is 1.85 crore tones a year, according to Bangladesh Cement Manufacturers Association (BCMA) data. Cement consumption was 1.3 crore tones in 2012 and 1 crore tones in 2011. Consumption for 2013 has been estimated at 1.45 crore tones, the cement association data shows. Dhaka and Chittagong account for nearly 65 percent of total consumption. As it is a heavy industry, huge investment is needed to set up a unit with backward and forward linkage facilities. It will cost around Tk 1,000 crore, if a unit has the capacity to produce 10,000 tons of cement a day with adequate backward and forward linkages. The backward and forward linkages refer to the transportation of raw materials and shipment of finished products by a company’s own transportation chain, in which, ocean going vessels are included. Although Bangladesh is self sufficient in cement production, it needs to import all the raw materials used in cement manufacturing. The main ingredients for cement include clinker, gypsum and fly ash, which are mainly imported from Thailand, Malaysia, Vietnam and China. Cement Importers from Bangladesh Name of the Company Countries Suvino Exports Pvt. Ltd. India Bawajee Inns Pakistan Pakistan Anies Junkshop Philippines Padra Engineering Trade Co. Iran Copper Levante Sl Spain Arabian Seasons General Trading United Arab Emirates Global Trades Corporation Ltd. Srilanka Koya Inter Co. United States
  • 10. Contribution to the National Exchequer The Industry contributed an amount of Tk 192,035,302 to the National Exchequer in the form of Customs Duty. Value Added Tax (VAT) and Advance Income Tax deducted at source during the year under review. Contributions to the national exchequer made under various heads during the last five years have been mentioned below: Contribution to the National Exchequer SWOT Analysis: Strengths  Less competitive local market.  Many rivers to drain factory wastage easily.  There is a 12 percent increase in domestic demand of cement every year.  Local investors are being interested to invest n this sector.  Value Added Tax (VAT) and Advance Income Tax deducted by government.  Profit increasing day by day for increased demand.  Available labor at very low wage. Weaknesses  The prices of clinker and other raw materials have gone up.  Energy supply is not sufficient in Bangladesh instead of demand.  Transportation system is very bad in Bangladesh.  Political influence is unfavorable in Bangladesh.  Low skilled worker.  Shortage of high technology. Particulars 2012Taka 2011 Taka 2010 Taka 2009 Taka 2008 Taka Value Added Tax 128,785,590 128,250,859 95,143,766 87,809,441 67,832,435 Duties at impost stage 48,851,621 46,414,898 41,696,758 54,869835 44,361,711 Advance Income Tax Adjustable/ Refundable 14,398,091 15, 838,757 4,200,000 2,641,629 1,201,679 Total 192,035,302 190,504, 514 141,040,524145,320,905113,395,825
  • 11. Opportunities  Strong economy.  Construction sector growth.  Govt. support on local manufacturing rather than importing.  Growing urbanization. Threats  Construction sector dwindling.  Energy price and supply.  International pricing of raw materials.  Growing usage of steel materials for construction.  Global competitiveness. Conclusions & Recommendations In FY 1980-81, the contribution of the board industry sector to real GDP was 17.31% which has increased to 29.73% in FY 2011-2012.Cement industry in the new sector of industrial sector of Bangladesh. It has passed only 18 years. The trend of growth and performance of cement industry rapidly increase day by day during the 18 years. The findings and solutions section of the report shows that the production, sale and investment of the cement company increased day by day due to some barriers like increase price of raw material, low price of cement in the world. These industries also developed some other manufacturing company like “Shoven bag manufacturing company, Miracles, Sino Bangla”. This company make woven bags by importing raw materials .It supplies the bag in local and foreign market. Bangladesh is set to export cement bag for the first time to India diversifying the country’s export basket. It also try to export South American countries like Brazil and Paru.
  • 12. Cement sector of Bangladesh has huge growing possibilities. The sector has grown day by day with huge prosperity. Some actions will take to increase its success like- · Bangladesh government takes initiatives like tax and tariff free import of raw material Provide subsidiary and easy loan for the sector All company should huge marketing strategies for domestics and foreign investment The cement industry will play a major role for earnings foreign remittance with the help of increasing growth and performance and also make strong economy for our loving motherland.
  • 13. LIST OF CEMENT EXPORTERS Bashundhara Group Bashundhara City Tower, Level-11, 13/Kha/1 Pranthapath Dhaka, Bangladesh Phone : 88-02-8119006 Ext 4251807 Fax : 88-02-8111594 E-mail : bgc@bdcom.com Chittagong Cement Clinker Grinding Co. Ltd. Chittagong, Bangladesh Phone : 88-031-740902-3, 740955 Fax : 88-031-740904 Confidence Cement Ltd. Ispahani Bldg (4th Flr), Sk Majib Road, Agrabad, Chittagong, Bangladesh Phone : 88-031-711471-3 Fax : 88-031-711474 Mongla Cement Factory Sena Kallyan Bhaban, 195 Motijheel C/A, Dhaka 1000, Bangladesh Phone : 88-02-9553017, 9560051 Fax : 88-02-9565820 E-mail: info@senakalyan.com Holcim Cement (BD) Co. Ltd. House # 38, Road # 14, Gulshan Dhaka, Bangladesh Phone : 88-02-9881002-3, 8812485 Fax : 88-02-9886394 E-mail : info-bgd@holcim.com Lafarge Surma Cement Ltd. House # 35, Road # 24, Gulshan-1, Dhaka-1212 Phone : 88-02-8812026 Fax : 88-02-8825413 Email: masud.almehmud@bd.lafarge.com Website : www.lafarge-bd.com Meghna Cement Mills Ltd. Sena Kallyan Bhaban (14th Flr), 195 Motijheel C/A, Dhaka, Bangladesh Akij Cement (Akij Group) 73, Dilkusha C/A, Dhaka - 1000 Phone : 88-02-9563008-9, 7169017-18 Fax : 88-02-9564519 Email : sals@akijonline.com, info@Akij.net Bangladesh Cement Manufacturers Association C/o. Bashundara Group Bashundara City 13/Ka/1, Panthpath Dhaka 1205 Fax: 880-2-9556459 E-mail: bgc@bdcom.com References website Login time http://en.wikipedia.org/wiki/Bangladesh_Cement_Manufacturers_Association Date: 22-11-2013,4.44am https://www.google.com.bd Date: 21-11-2013,10.00pm http://www.cemexbangladesh.com/ip/ip_ip.html Date: 21-11-2013,10.51pm

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