Construction sector burgeoning fast


The country’s construction sector has registered more than double growth over the last ten years.

It has virtually emerged as the largest sector involving construction materials like rod, cement and ceramic export.

Several development projects and housing sector are helping some linkage industry to emerge as one of the largest sectors.

Out of the 269 sub-sectors rod, cement, paints and ceramics are leading the country's construction sector as well as contributing in foreign exchange earnings. 

Although ceramic tiles and paints are imported, Bangladesh is now self-reliant in rods and cement production. An enormous investment has been made in the two sectors as they have great potential. New investments including foreign investment is also being made for these two products. 

As the size of the construction sector grows, so does the production of rod and cement. According to statistics, the size of the country's construction sector has doubled due to various mega projects of the government. To meet the domistic demand, more than 300 re-rolling mills have been set up in the country. The number of factories producing at least 10,000 metric tonnes of rod per year is 52. These factories produced 98 percent of rods to meet the country's demand. 

Last year, steel products including rods were sold for around Tk 41,000 crore. Mainly due to the huge growth, some of the established and large industrial groups of the country have expanded their investment in this sector. Among these industrial groups and organizations there are Abul Khair, Bashundhara, BSRM, RSRM, KSRM, Crown, GPH etc. 

The business insiders are optimistic about the future prospects of these industries because of the rapid urbanization, government infrastructure projects, and real estate sector growth. 

Based on the Bangladesh Steel Manufacturers Association (BSMA), the current market size of the steel industry in the country is around Tk 30,000 crore. The number of organizations listed by the association is 40. At present, the combined production capacity of the country's steel sector is nine million tonnes. Of this, 55 lakh tonnes are being used at present. However, due to corona pandemic, it has come down to 30-35 lakh tonnes. The total investment of entrepreneurs in this sector is Tk 50,000 to Tk 60,000 crore. 

Market statistics showed, Abul Khair Steel is leading the steel sector. At present the annual production capacity of the company is 1.4 million tonnes. Bangladesh Steel Re-rolling Mills Limited (BSRM) has an annual production capacity of 700,000 tonnes. BSRM has also invested in foreign countries like Hong Kong and Kolkata. 

Besides, Kabir Steel Re-rolling Mills Limited (KSRM) has a production capacity of eight lakh tonnes per year. Anwar Group has an annual production capacity of 360,000 tons.

Apart from these local big group, Chinese steel giant Kunming Iron and Steel Holding Company is investing US$ 2.3 billion annually in setting up a factory with a capacity of two million tonnes in the Mirersarai Economic Zone in Chittagong. It is the largest investment in the country's manufacturing sector. Japan's largest steelmaker Nippon Steel and Sumitomo Metal will also invest US$ 60 million in the joint venture with local company McDonald's Steel Building Products.

According to the Bangladesh Cement Manufacturers Association (BCMA), the country's current cement market is worth Tk 28,000 crore. Out of 36 companies, five multinational companies are also doing business in this sector. The combined production capacity of the cement sector is 65 million tonnes, although 35 million tonnes are being used. The total investment of entrepreneurs in this sector is Tk 45,000 crore. 

It was learnt that, in 2019 the capacity of the cement industry stood at 58 million tonnes while annual demand was 31 million tonnes. With overcapacity and high competition, manufacturers try to sell their products at the lowest possible price and export to different foreign destinations. 

The  annual growth rate of the cement industry was 10 to 12 percent before the outbreak of pandemic. But the lockdown has slowed down the growth rate at an estimated 3 to 6 percent. Bangladesh exports cement to India, Myanmar, Sri Lanka, Nepal, and the Maldives.  

BCMA First Vice President and BSMA Secretary General Md Shahidullah said, "Half of the total capacity of the steel and cement industry in the country remains unused. Demand has dropped further due to coronavirus outbreak. If the growth of the construction sector in the country is maintained, the demand for rod and cement will increase further in the future. However, with the existing capacity, it is possible to meet the demand in the next 20-25 years. Once we started importing rods and cement, but now we are self-sufficient in this sector". 

More companies are pouring heavy investment into the sector to increase the capacity. Bashundhara Group is investing Tk 1,000 crore for the installation of a third cement production unit. Moreover, back in July, Bangladesh Chemical Industries Corp (BCIC) and Saudi-Arabia based Engineering Dimension International Investment (EDII) agreed to build a cement plant under the name of Saudi-Bangla Integrated Cement Co Ltd. 

However, Sohidullah said, the steel sector is facing a shortage of materials as the raw materials usually came from European countries and the United States, which are also facing the Coronavirus outbreak. On the other hand, the demand for cement plunged heavily in recent days. The cement companies meet the demand of government projects, corporate projects and individual homebuilders, but the current situation has almost stopped their activities. 

He urged the government to declare an incentive as well as lifting the illogical advance income tax for these sectors for their survival in the coming days. 

Domestic companies are now able to meet a large part of the domestic demand for these three types of ceramic products such as utensils, sanitary and tiles. New investments are also coming. Imports of ceramic products are declining due to increase in production capacity. On the other hand, exports are also taking place. All in all, domestic companies are building a solid foundation in the ceramic sector. 

According to the Bangladesh Ceramic Products Manufacturers and Exporters Association (BCMEA), there are currently 66 companies in the ceramic sector. Of these, 28 are tile factories. Their investment amount is US$ 4975 crore. 

The country is now fairly self-sufficient in the production of another necessary 'paint' for house construction. The paint market is worth Tk 3,000 to Tk 4,000 crore. The color business is growing at a rate of six to seven percent every year. 

According to the Bangladesh Paint Manufacturers Association, there are 34 companies in the country producing paints. Eight of them are foreign companies.