Companies plan to boost capacityForeign investors who have proposed huge investments in the cement sector, have also proposed boosting their production capacities in the second phase.
Foreign investors who have proposed huge investments in the cement sector, have also proposed boosting their production capacities in the second phase.
Nigeria’s Dangote Cement, China’s Hongshi and Huaxin, and India’s Reliance Cement have received approvals for a combined foreign direct investment (FDI) of $1.45 billion (Rs156 billion) in the sector. Their proposed production capacity stands at 22,000 tonnes per day.
Ratish Basnyat, head of private investment and development programme at Investment Board Nepal (IBN) said Hongshi has proposed doubling its production capacity in the second phase, while Huaxin plans to triple its capacity in three phases. Currently, their proposed daily production stands at 6,000 tonnes and 3000 tonnes, respectively.
According to Cement Manufacturers’ Association of Nepal (CMAN), Nepali cement makers fulfil 80 percent of the domestic demand and the market is nearing a saturating point.
However, Ramesh Gupta, director of Hongshi’s joint-venture partner Shivam Cement, said the demand will grow as works on reconstruction and big infrastructure projects begin. “Currently, the market is growing at the rate of 12-15 percent annually and we expect the market to grow by at least 20 percent after two years,” he said. “We also aim to export our products.”
Hongshi Shivam, which is now currently conducting Environment Impact Assessment, plans to start building its factory in January 2017 and start production from 2019.
Although Dangote had initially planned to produce 3,000 tonnes a day initially, it later took approval for 6,000 tonnes. Roop Rawal, Dangote’s representative for Nepal, said it does not have immediate plans to increase the production capacity. “Nepal still imports a huge quantity of cement from India and we see an opportunity here,” he said. “We have also targeted other South Asian markets.”
Reliance, however, has not proposed any hike in its production capacity, according to IBN. It plans to produce 7,000 tonnes of cement per day. However, existing domestic cement makers do not see a big market for foreign investors as Nepal is headed towards becoming self-reliant in cement.
“Unless big infrastructure projects are developed, they won’t get a big market,” said CMAN President Dhruba Thapa. “Export is an option, but higher cost of production here will make it harder for Nepali industries to export cement.”
He said amid chronic power shortage and poor transport infrastructure, Nepali cement makers cannot be competitive in the international market.
According to CMAN, the domestic demand stands at 4.5 million tonnes a year and existing industries have installed capacity of 6.5 million tonnes, but the factories have not been able to operate at their full capacities due to power crisis. There are 46 cement factories currently in operation and Rs60 billion has been put into the sector.