According to CW Research’s 2018 Nepal Cement Market Report, cement demand in the country is expected to exceed 10 million tons per year by 2023.
The stabilizing political environment, coupled with pressure from the population to complete vital construction projects in the aftermath of the 2015 earthquake, as well as transportation and energy infrastructure, will further accelerate this upward trend in domestic cement consumption.
Apparent cement consumption in Nepal increased at an annual average rate of 8.1 percent to 6.1 million tons of cement in 2017, while per capita cement consumption rose by 6.8 percent to 208 kg in the 2012- 2017 period. Consumption has been driven by investments in large hydroelectricity projects, as well as in road and housing. Small-scale consumption of cement by individual households is also critical in Nepal, especially for small-production capacity manufacturers, who mostly target this segment through a competitive pricing strategy.
According to Raluca Cercel, Associate with CW Research: “the Nepalese cement market is a price-driven one, with the end user having limited purchase criteria in regards to quality considerations. Small-scale plants mostly cater cement to individual households, which decide on their supplier on pricing considerations only.”
Construction sector still constrained by bureaucracy
The Nepalese economy has gone through several highs and lows, having been impacted by natural disasters, political instability and protests. Due to its geographical position, Nepal also acts as a buffer between India and China, and their geopolitical policies and strategies often affect Nepal’s economy.
Domestically, important construction projects that would lead to a large improvement in cement demand continue to be bottlenecked by bureaucratic issues, and are often entangled in geopolitical tensions, leaving cement manufacturers and exporters alike frustrated with the pace of development in Nepal. More than two years after the devastating earthquake of 2015, little progress has been made in terms of housing reconstruction, as the price hikes in the wake of the earthquake have left little options for the government and for homeowners.
A splintered and sought-after market
The Nepalese cement market is highly fragmented and unconsolidated, dominated by a myriad of small and medium producers lacking plans for major expansions. Most cement manufacturers operating grinding plants are based close to the border with India, which enables them, under normal political and market conditions, to import clinker easily and without hurtful delays caused by poor infrastructure. Towards the end of 2017, and still at the beginning of 2018, Nepalese cement manufacturers struggled with clinker shortages as problems on the Indian border (Raxaul-Birgunj) prevented the transportation of clinker.
Difficulties in transporting cement in the country due to the very poor quality of the roads also pressures local manufacturers, who often have no other choice than to limit their supply capability within a 100km radius.
Raluca Cercel observes: “Nepal also has large amounts of limestone reserved that remain untapped. One of the obstructing factors is poor connection to limestone reserves, as they are usually located at a considerable distance from consumption centers. Investors with the financial capability of investing in creating their own infrastructure are the only ones who, at the moment, can take advantage of the situation.”
Nevertheless, new manufacturers crowd for a place at the table. Demand from small-sized consumers remains ripe, and will continue to be the main driver of the domestic industry in the coming years.
Find out more about the Nepal Cement Market Report here