The cement industry in Nepal experienced a growth in consumption from 1.33 million tonnes in FY 2000 to 3.28 million tonnes in FY 2011, with a CAGR of 8.6%, influenced by political stability and capacity investments. Despite a rated capacity of 4.34 million tonnes in FY 2011, local production was only 2.56 million tonnes, leading to significant imports, particularly from India. Future consumption is projected to reach around 4.7 million tonnes by FY 2015 and 8.1 million tonnes by FY 2021, with expectations of improved capacity utilization due to better power availability.

1. Nepal Cement Industry
Overview

2. National Scenario
Cement consumption in Nepal has grown from a level of
1.33 mio t in FY 00 to 3.28 mn tonnes in FY 11. The
cumulative average growth rate (CAGR) during this period
was 8.6% pa. The CAGR during the past 3 years had been
very high (14.9%), this is due to improved political stability
in the country and investment in capacity building projects.
The import of cement into the country has decreased from
68% (0.90 mn tonnes) of the country’s consumption in FY
00 to 22% (0.72 mn tonnes) of total country’s consumption
in FY 11. On the contrary, clinker imports have gradually
increased and reached 1.32 mn tonnes in FY 11 from
negligible (0.01 mn tonnes) in the year FY 00. If cement
equivalent for clinker imported in Nepal is also considered,
the cement imports remained over 70% over this period in
Nepal.

3. Chart below depicts the growth in cement consumption in
Nepal.

4. Regional Demand: The regional dispersion for consumption in Nepal is
given in the following table and chart:

5. The Central Region is the biggest cement market with an estimated
cement consumption of around 1.6 mn tonnes. This is due to development
in and around the capital city (Katmandu), industrial hubs near the
bordering towns with India and setting up of operational base by
trader’s near the entry points with India.

6. Cement Supply

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. 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% of
Nepal’s consumption in FY 11 was met through imports, which take
place from India.
Indian players like Jaypee, Prism, Century, Birla Corp. ACC, Lafarge
etc. supply cement from plants mainly located in the Bilaspur and
Satna clusters. In case of clinker, major players supplying clinker
includes Shree, Prism, Jaypee.

9. Present Demand Supply Gap: Despite Nepal having an rated cement
capacity of about 4.34 mtpa, the plants are seen to produce around 2.56 mn
tones in FY 11. The balance cement (0.72 mn tones) requirement was imported
from India.

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 by
Vishwakarma with 10% market share. Other Nepal players have less
than 5% market share.

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. FUTURE OUTLOOK

13. Cement Consumption: Future cement consumption has been
forecasted using following methodology.
Future cement consumption has been worked out under 3
different scenarios viz most likely, optimistic and pessimistic.
Future cement consumption under the 3 scenarios is shown in
the following chart:

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. Expected New Local Companies:
The estimation of future capacity additions have been made based on
interaction 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
Cement
Central Unitec Birganj GU 0.17 FY 14
Cement
Eastern Maruti Cement Siraha IU 0.13 FY 13
Expansion
Eastern Nigali Cement Dhankuta GU 0.05 FY 12

16. Region Plant Location Typ Rated Commissionin
e Cement g Year
Capacity (mn
tonnes)
Mid- Dang Dang IU 0.50 FY 16
Western Cement
Mid- Ghorahi Dang IU 0.33 FY 13
Western Cement
Mid- Sonapur Dang IU 0.23 FY 13
Western Cement
Western United Lele IU 0.25 FY 15
Cement
Western Chaudhary Ridi CU 0.45 (only FY 15
Group clinker)
Western Chaudhary Butwal GU 0.33 FY 14
Group
Western Dynasty Kapilbastu IU 0.13 FY 13
Cement
Western Jagadamba Rupandehi GU 0.20 FY 14
Cement
Expansion

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. 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 2.56
FY 12 4.65 2.93
FY 13 5.48 3.76
FY 14 6.17 4.56
FY 15 6.42 5.11
FY 16 6.92 5.94
FY 17 6.92 6.24

19. Year Rated Capacity (mn tonnes) Effective Capacity (mn tonnes)
FY 18 6.92 6.32
FY 19 6.92 6.32
FY 20 6.92 6.32
FY 21 6.92 6.32

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 MTPA
Based on effective supply capability, there is likely to be deficit of cement up

21. Report Prepared by:
GEETA INVESTMENT
SERVICES
Avdesh Mandal
avdlink@gmail.com
avdesh.indrayani@gmail.com
+9779803384110
+919999504397
Sources:
National Construction & Building Materials, INDIA
Cement Manufacturers Association of Nepal
Department of Industry, Govt. of Nepal