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News Update on Bangladesh, June 2023

Update on Bangladesh, June 2023

Written by David Perilli, Global Cement 14 June 2023
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Cement producers in Bangladesh received a surprise at the start of June 2023 when the government budget proposed increasing the duty on imported clinker. The Bangladesh Cement Manufacturers Association (BCMA) reacted this week by calling for the duty on clinker to be reduced, while also calling for the same for a non-adjustable advance income tax (AIT) applied to associated imports and sales.

During a press conference, reported upon by the Financial Express newspaper and other media, BCMA president Alamgir Kabir said that the customs duty on key raw materials for the sector had previously been around 5% of the import value. However, he argued that the new suggested increased tariff was “disproportionate” because it placed the burden at 12 - 13%. He urged the government to treat the cement sector as a "priority sector" given that it was facing higher prices generally due to the aftermath of the Covid-19 pandemic, the energy shocks from the Russian invasion of Ukraine and negative currency exchange effects.

The BCMA’s latest lobbying call may sound familiar because it follows a similar battle against import charges from late 2022. A supplementary duty was introduced in November 2022 when the National Board of Revenue (NBR) changed the way limestone was coded in response to a significant increase in imports from 2020. At the time, the price of limestone imports reportedly nearly doubled. The BCMA may have won this battle because in March 2023 the NBR withdrew its supplementary duty. It did require that importers submit to further scrutiny including an updated Import Registration Certificate and various tax related requirements.

The timing of the NBR’s decision to relax the limestone duty is telling given that the previous month or so six of the country’s seven publicly listed cement producers reported either falling profits or losses for the second half of 2022 or the year as a whole. Only LafargeHolcim Bangladesh bucked the trend with an increase year-on-year in its annual profit after tax in 2022, although it attributed this to 95% volume growth in its aggregates business.

As discussed previously a characteristic of the cement sector in Bangladesh is that the country has no domestic limestone reserves. It all has to be imported. Arusha Ahmed Khan, Shun Shing Group presented a summary of the national industry at the Global Slag Conference that took place in early June 2023 in Düsseldorf. The country has two integrated cement plants and 36 grinding mills operated by 31 companies with a total capacity of 84Mt/yr. At present around 14Mt/yr of new cement grinding production capacity is planned by UK Bangla Cement, MI Cement, Confidence Cement and Dubai Bangla with commissioning dates expected from mid-2023 to mid-2025. Khan revealed that the government switched from British to European standards in the early 2000s leading to a high level (95%) of blended cements on the market. Use of slag cements has grown as more producers commission vertical roller mills and more uptake of slag and other blended cements using secondary cementitious materials (SCM) is expected in the future.

A key vulnerability for a grinding-heavy cement sector, like the one in Bangladesh, is any burden on imports such as logistic costs, currency exchange effects and government tariffs. Sure enough each of these examples has been reported locally. The government says that its proposed higher import tariff on clinker is the first such change in a decade. Cement producers have reacted, predictably, in a negative manner. Whether the authorities go ahead with the planned increase and how well the cement sector could absorb it remains to be seen. There may never be a good time for a tax rise but the BCMA has been able to present the current period as being especially bad.

Read the review of the 15th Global Slag Conference 2023

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Last modified on 14 June 2023
Published in Analysis
Tagged under
  • Bangladesh
  • Government
  • Import
  • Clinker
  • Duty
  • Tax
  • Bangladesh Cement Manufacturers Association
  • lobbying
  • Limestone
  • LafargeHolcim Bangladesh
  • HeidelbergCement Bangladesh
  • Confidence Cement
  • Crown Cement
  • Premier Cement
  • Meghna Cement Mills
  • Aramit Cement
  • Shun Shing Group
  • GCW612
  • UK Bangla Cement
  • MI Cement Factory
  • Dubai Bangla
  • grinding plant
  • Upgrade
  • Standards
  • blended cement
  • Slag
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