Nepal Cement Industry Nepal Cement Industry OverviewOverview

National ScenarioNational Scenario

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

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

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

The Central Region is the biggest cement market with an estimatedThe Central Region is the biggest cement market with an estimatedcement consumption of around 1.6 mn tonnes. This is due to developmentcement consumption of around 1.6 mn tonnes. This is due to developmentin and around the capital city (Katmandu), industrial hubs near thein and around the capital city (Katmandu), industrial hubs near thebordering towns with India and setting up of operational base bybordering towns with India and setting up of operational base bytrader’s near the entry points with India.trader’s near the entry points with India.

Cement SupplyCement Supply

The estimated FY 11 rated cement capacity in Nepal is 4.34 mio tpaThe 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(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 ratedcapacity of the Integrated Units (IU) and 3.22 mio tpa is the ratedcapacity of the Grinding Units (GU). However, the plants are seen tocapacity of the Grinding Units (GU). However, the plants are seen to

not working at full capacity utilisation due to following reasons:not working at full capacity utilisation due to following reasons:

Poor availability of grid powerPoor availability of grid power High captive power generation costHigh captive power generation cost High cost of fuel (Coal and LDO)High cost of fuel (Coal and LDO) Low availability and difficulty in sourcing fuel (coal)Low availability and difficulty in sourcing fuel (coal) Low labour efficiencyLow labour efficiency Problems and issues created by localsProblems and issues created by locals Poor maintenance of plantsPoor maintenance of plants Inefficiency/ poor plant technology in the old plantsInefficiency/ poor plant technology in the old plants

On an average basis, IU’s and GU’s are working around 55% and 60%On an average basis, IU’s and GU’s are working around 55% and 60%capacity utilization respectively.capacity utilization respectively.

As mentioned earlier in cement equivalent terms, around 70% ofAs mentioned earlier in cement equivalent terms, around 70% ofNepal’s consumption in FY 11 was met through imports, which take Nepal’s consumption in FY 11 was met through imports, which take place from India.place from India.

Indian players like Jaypee, Prism, Century, Birla Corp. ACC, LafargeIndian players like Jaypee, Prism, Century, Birla Corp. ACC, Lafargeetc. supply cement from plants mainly located in the Bilaspur andetc. supply cement from plants mainly located in the Bilaspur andSatna clusters. In case of clinker, major players supplying clinkerSatna clusters. In case of clinker, major players supplying clinkerincludes Shree, Prism, Jaypee.includes Shree, Prism, Jaypee.

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

Market SharesMarket Shares:: The market shares of local players in Nepal for The market shares of local players in Nepal for FY 11 is given in the following chart.FY 11 is given in the following chart.

Jagdamba is the market leader with 12 % market share followed byJagdamba is the market leader with 12 % market share followed byVishwakarma with 10% market share. Other Nepal players have lessVishwakarma with 10% market share. Other Nepal players have less

than 5% market share.than 5% market share.

Chart: Cement supply share by Indian playersChart: Cement supply share by Indian players

Imported cement has 22% market share in Nepal, share of theseImported cement has 22% market share in Nepal, share of theseplayers is depicted in the following chart:players is depicted in the following chart:

Jaypee leads amongst the Indian players with 47% supply share toJaypee leads amongst the Indian players with 47% supply share toNepal followed by Century and Prism with 13% supply share each.Nepal followed by Century and Prism with 13% supply share each.

ACC has 12% supply share. Other players are with 5% or less supplyACC has 12% supply share. Other players are with 5% or less supplyshare in imports.share in imports.

FUTURE OUTLOOKFUTURE OUTLOOK

Cement ConsumptionCement Consumption:: Future cement consumption has been Future cement consumption has been forecasted using following methodology.forecasted using following methodology.

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

Future Cement ConsumptionFuture Cement Consumption: From a level of 3.3 mn tonnes in FY 11, : 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 cement consumption is likely to reach around 4.7 mn tonnes in FY 15

and 8.1 mn tonnes in FY 21.and 8.1 mn tonnes in FY 21.

Figures in million tonesFigures in million tones

Expected New Local CompaniesExpected New Local Companies::The estimation of future capacity additions have been made based onThe estimation of future capacity additions have been made based oninteraction with cement manufacturers and importers. Following tableinteraction with cement manufacturers and importers. Following table

depicts the capacities under the most likely scenario:depicts the capacities under the most likely scenario:

RegionRegion PlantPlant LocationLocation TypTypee

Rated Cement Rated Cement Capacity (mn Capacity (mn tonnes)tonnes)

CommissioninCommissioning Yearg Year

CentralCentral Shivam Shivam CementCement

MakwanpurMakwanpur IUIU 0.260.26 FY 12FY 12

CentralCentral Unitec Unitec CementCement

BirganjBirganj GUGU 0.170.17 FY 14FY 14

EasternEastern Maruti Cement Maruti Cement ExpansionExpansion

SirahaSiraha IUIU 0.130.13 FY 13FY 13

EasternEastern Nigali CementNigali Cement DhankutaDhankuta GUGU 0.050.05 FY 12FY 12

RegionRegion PlantPlant LocationLocation TypTypee

Rated Rated Cement Cement Capacity (mn Capacity (mn tonnes)tonnes)

CommissioninCommissioning Yearg Year

Mid-Mid-WesternWestern

Dang Dang CementCement

DangDang IUIU 0.500.50 FY 16FY 16

Mid-Mid-WesternWestern

Ghorahi Ghorahi CementCement

DangDang IUIU 0.330.33 FY 13FY 13

Mid- Mid- WesternWestern

Sonapur Sonapur CementCement

DangDang IUIU 0.230.23 FY 13FY 13

WesternWestern United United CementCement

LeleLele IUIU 0.250.25 FY 15FY 15

WesternWestern Chaudhary Chaudhary GroupGroup

RidiRidi CUCU 0.45 (only 0.45 (only clinker)clinker)

FY 15FY 15

WesternWestern Chaudhary Chaudhary GroupGroup

ButwalButwal GUGU 0.330.33 FY 14FY 14

WesternWestern Dynasty Dynasty CementCement

KapilbastuKapilbastu IUIU 0.130.13 FY 13FY 13

WesternWestern Jagadamba Jagadamba Cement Cement ExpansionExpansion

RupandehiRupandehi GUGU 0.200.20 FY 14FY 14

Effect of Power Crisis on Cement IndustryEffect of Power Crisis on Cement Industry

Currently Power Crisis in Nepal has limited the effective capacity Currently Power Crisis in Nepal has limited the effective capacity for the local players. Few GU’s have shifted to diesel based for the local players. Few GU’s have shifted to diesel based

gensets, however their running cost are high. It is expected that gensets, however their running cost are high. It is expected that the power situation would improve gradually as new Hydro the power situation would improve gradually as new Hydro

Projects come onstream. Also some of the new capacities are Projects come onstream. Also some of the new capacities are likely to have captive power plant to take care of the power outage. likely to have captive power plant to take care of the power outage.

Thus, the capacity utilization is expected to increase in coming Thus, the capacity utilization is expected to increase in coming years.years.

Based on the above, the capacity utilization has been graduallyBased on the above, the capacity utilization has been graduallyincreased in the coming years. The effective capacity utilisation isincreased in the coming years. The effective capacity utilisation is

envisaged to increase from 55 % to 100 % for existing IU’s and 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 59% to 85% for GU’s in another 6-7 years on account of improved

power situation and local issues resolved.power situation and local issues resolved.

The rated and effective capacity in Nepal for future years is The rated and effective capacity in Nepal for future years is given in the following table:given in the following table:

YearYear Rated Capacity (mn tonnes)Rated Capacity (mn tonnes) Effective Capacity (mn Effective Capacity (mn tonnes)tonnes)

FY 11FY 11 4.344.34 2.562.56FY 12FY 12 4.654.65 2.932.93FY 13FY 13 5.485.48 3.763.76FY 14FY 14 6.176.17 4.564.56FY 15FY 15 6.426.42 5.115.11FY 16FY 16 6.926.92 5.945.94FY 17FY 17 6.926.92 6.246.24

YearYear Rated Capacity (mn tonnes)Rated Capacity (mn tonnes) Effective Capacity (mn tonnes)Effective Capacity (mn tonnes)

FY 18FY 18 6.926.92 6.326.32

FY 19FY 19 6.926.92 6.326.32

FY 20FY 20 6.926.92 6.326.32

FY 21FY 21 6.926.92 6.326.32

Future Consumption – Supply GapFuture Consumption – Supply Gap::The most l ikely consumption - supply gap has been calculated The most l ikely consumption - supply gap has been calculated

basedbasedon the estimated most l ikely future consumption and most l ikely on the estimated most l ikely future consumption and most l ikely future supplying capacity. This is shown in the fol lowing chart:future supplying capacity. This is shown in the fol lowing chart:

Figures in MTPAFigures in MTPA

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

to FY 13 and FY 19 onwards.to FY 13 and FY 19 onwards.

Report Prepared by:Report Prepared by:GEETA INVESTMENT GEETA INVESTMENT

SERVICESSERVICESAvdesh MandalAvdesh Mandal

avdlink@gmail.comavdlink@gmail.comavdesh.indrayani@gmail.comavdesh.indrayani@gmail.com

+9779803384110+9779803384110+919999504397+919999504397

Sources: Sources: National Construction & Building Materials, INDIANational Construction & Building Materials, INDIA

Cement Manufacturers Association of NepalCement Manufacturers Association of NepalDepartment of Industry, Govt. of NepalDepartment of Industry, Govt. of Nepal