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Introduction to Nepalese Cement Market Pg2

    1. Assumption of domestic production of cement both from public and                 private sectors

Fifteen integrated mini, medium and large scale cement industries (refer        table 2, A and B - I) and 11 clinker based mini and medium scale cement industries (refer table 2, B - II) were utilizing their capacities below 50%. These industries will utilize their respective capacities as estimated below.

 

 

Table 4:Estimated capacity utilization of existing cement

producing industries



Year

Capacity utilization (%)

2002/03

46

2003/04

39

2004/05

49

2005/06

40

2006/07 – 2007/08

45

2008/09 – 2009/10

50

2010/11 – 2014/15

55

2015/16 – 2019/20

60

 Source: 2002/03 – 2005/06, economic survey report 2006/07 – MOF.

 2006/07 – 2019/20 is estimated by Arun Valley Hydropower Development Company Limited.

1.3 Domestic production, public and private sectors

The domestic production from three public sector industries is presented in Table 5.

Table 5: Domestic cement production of public sector

(Himal, Hetauda & Udayapur)



Fiscal year

Total production (MT)

1989/90

101,171

1990/91

135,897

1991/92

237,327

1992/93

247,891

1993/94

315,514

1994/95

326,839

1995/96

309,466

1996/97

226,681

1997/98

139,080

1998/99

190,588

1999/2000

205,835

 

 

 

………contd

Fiscal year

Total production (MT)

2000/01

215,098

2001/02

233,000

2002/03

255,171

2003/04

279,412

2004/05

277,736

2005/06

212,830

2006/07

239,434

2007/08

239,434

2008/09

266,037

2009/10

266,037

Source: Actual production data as published in economic survey, 2004/05, MOF.

Production data from 2005/06 to 2009/10 are estimated by Arun Valley Hydropower Development Company Ltd. as per capacity utilization.

Note:      Himal Cement Company was dissolved in 2002, so production data from 2002/03 depict production from Hetauda and Udayapur Cement Industries only.

Table 5 above revealed that the production of cement by public sector industries is not steady rather erratic. The maximum cement production as recorded was 326,839 MT in 1994/95 which was 62% of the total capacity. The major cement industries are in public sector and the static state of public units is a common phenomenon in developing countries. This erratic trend continued from 1993/94 to 2005/06 and may continue in the years to come. Improper and inadequate maintenance of raw materials, operational inefficiency and poor management, load shedding are the reasons responsible for such trend of production.

Cement production from 2002/03 to 2005/06 is estimated as per capacity utilization. It is assumed that the industries will increase their capacity of production by 5% starting from 45% of the capacity in 2006/07 and will maintain 60% capacity in 2015/16 and thereafter.

 

Table 6: Estimated cement production of private sector



Fiscal year

A

B

C

Total production (MT)

1992/93

91,822

 

 

91,822

1993/94

91,822

 

 

91,822

1994/95

93,659

 

 

93,659

1995/96

133,860

 

 

133,860

1996/97

67,949

273,929

 

341,878

1997/98

88,150

355,368

 

443,518

1998/99

86,313

347,964

 

434,277

1999/2000

78,967

318,350

 

397,317

2000/01

75,294

303,543

 

378,837

2001/02

82,640

333,157

 

415,797

2002/03

84,477

340,561

1,057,152

1,482,190

2003/04

71,621

288,736

896,281

1,258,638

2004/05

89,986

362,771

1,126,097

1,578,854

2005/06

73,458

296,440

919,263

1,289,161

2006/07

82,640

333,157

1,034,171

1,449,968

2007/08

82,640

333,157

1,034,171

1,449,968

2008/09

91,822

370,175

1,149,078

1,611,075

2009/10

91,822

370,175

1,149,078

1,611,075

Note:      Estimated by Arun Valley Hydropower Development Company Ltd.

A:            Himal, Hetauda and Udayapur Cement Industries.

B:            Maruti, Triveni, Panch Ratna, Butwal, Balaji, Budhha, Manakamana, Gorakhkali, Sidhhartha, Reliance, Kalash and Sagarmatha Cement Industries. ,

C:            Mittal, Dynasty, Cosmos, Pashupati, Vijaya, Chitwan, Jagadamba, Brij, Bishwokarma, Nepal Abuja, and Ambe Cement Industries.

Since the individual production figures of private sector industries are not available, there are no other alternatives than to estimate the production as per their capacity utilization. The capacity utilization of the cement industries up to 2005/06 is as per the capacity utilization of existing cement producing industries given in economic survey – 2005/06, Ministry of Finance. Regarding the capacity utilization from 2006/07 to 2019/20 is estimated by Arun Valley Hydropower Development Company Ltd. for the study purpose. However this will not limit the validity of market study.

Above estimations are ambitious considering the clumsy procurement procedures of raw materials, inefficient operation, inexperienced management and all the more problem of power shedding. If they are to maintain production programme as depicted in table 6, they need optimum use of raw material, adopt scientific purchasing management and regular power supply. It is difficult if not impossible to go beyond 60% of the production due to regular power load shedding adopted by Nepal Electricity Authority at least for 5 years and a decade otherwise. The maximum production capacity utilized was 62% in 1994/95 (table 3). the capacity utilization showed declining trend that justified the future capacity utilization will not maintain more than 60%.