[🇧🇩] Ceramic Industry in Bangladesh

[Saif]

MGI expands ceramic tiles production with $45m investment

Of the investment, $19 million came from its own pockets whereas $26 million in the form of a syndicated loan, which was released recently, he said.

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MGI expands ceramic tiles production with $45m investment

Meghna Ceramic Industries, a concern of the Meghna Group of Industries (MGI), has increased its production capacity with an investment of US $45 million (about Tk 500 crore) to grab a bigger share of the growing half a billion US dollar-worth tiles market.

Since July last year, the company's factory in Ashariar Char in Narayanganj, Dhaka's neighbouring district, has been churning out 51,000 square metres of "Fresh Ceramics" tiles per day, Assistant General Manager said Rajib Bhattacharjee.

A year ago, it was 31,000 square metres, he said.

Of the investment, $19 million came from its own pockets whereas $26 million in the form of a syndicated loan, which was released recently, he said.

The lead arranger, Prime Bank, a private commercial lender, provided $4 million while the Islamic Corporation for the Development of the Private Sector, a concern of the Islamic Development Bank Group, provided $22 million, said Bhattacharjee.

Repayable in 8 years, including a one-year grace period, the loan comes an interest rate of 3.75 percent plus the Secured Overnight Financing Rate (SOFR), he said.

The SOFR is a benchmark interest rate for dollar-denominated derivatives and loans that replaced the London Interbank Offered Rate (LIBOR). It varies from time to time, standing at around 4.3 percent in January 2023 whereas at 5.3 percent most recently.

"We used the syndicated loan for payment of import bill of necessary sophisticated machinery from Europe," informed Bhattacharjee.

With this, a total of $100 million has been invested into the facility, which uses technology adopted from the US, Germany, Italy and China and employs over 400 people, he said.

Of the initial $55 million invested in 2021, $20 million came from another syndicated loan arranged by Prime Bank, he said.

The expansion was to grab a share of the growing ceramic industry, spending capacity of people and rapid urbanisation over the past decade, said Bhattacharje.

Bangladesh has been witnessing an increasing demand for ceramic tiles for rising private and public construction thanks to urbanisation and the economy's steady growth.

Local and international companies invested $1.58 billion in the ceramics sector for producing tiles, tableware, and sanitaryware while directly employing nearly 20,000 people, according to the Bangladesh Ceramic Manufacturers & Exporters Association (BCMEA).

Of the investment, 62 percent or $979 million was meant for tiles.

Now, there are 31 ceramic tiles manufacturing facilities in the country with a combined annual production capacity of 20.70 lakh square metre.

An estimated $633 million-worth tiles were sold in the country in fiscal year 2022-23, it said.

The ceramic sector in Bangladesh caters to 80 percent of the total local demand for ceramic products, BCMEA said.

The local ceramic industry has registered an annual average growth rate of about 15 percent since fiscal year 2015-16, according to the BCMEA.

This was a strategic investment in recognition of the market demand and growth opportunities for ceramic products, said Shams A Muhaimen, deputy managing director (transaction banking, debt capital market & financial institutions), Prime Bank.

The ceramic tiles industry in Bangladesh exhibits strong demand fuelled by urbanisation, infrastructure development and a growing construction sector, making the project commercially viable, he said.

With a diversified product portfolio and expanding production capacity, the MGI is well-positioned to capitalise on this market demand and drive further growth and profitability, he noted.

The MGI has an extensive distribution network across the country, giving it another competitive edge, he added.​

 

[Saif]

Ceramic factories struggling amid gas crisis

The country's ceramic manufacturing factories in key areas like Dhaka, Gazipur and Narsingdi have been struggling to continue production as they have been suffering from a severe gas crisis in recent times. According to industry people's estimation, nearly 25 factories in the region have been suff

thefinancialexpress.com.bd

Ceramic factories struggling amid gas crisis
SAIF UDDIN
Published :
Jul 02, 2024 09:54
Updated :
Jul 02, 2024 09:54

The country's ceramic manufacturing factories in key areas like Dhaka, Gazipur and Narsingdi have been struggling to continue production as they have been suffering from a severe gas crisis in recent times.

According to industry people's estimation, nearly 25 factories in the region have been suffering a production loss of estimated Tk 200 million every day for around the last one month due to the supply crunch of natural gas, one of the key ingredients of the ceramic products.

They also said the local manufacturers are afraid of losing competitiveness in both local and international markets unless the government takes immediate actions.

Keeping this in view, the apex trade body of ceramic manufacturers have urged the power, energy and mineral resources ministry to take necessary action so that the factories get uninterrupted gas supply.

Factories in Mirpur-12, Savar, Dhamrai of Dhaka district, Tongi, Kashimpur, Bhabanipur, Bhawal, Mirzapur, Sreepur, Mawna of Gazipur, Panchdona of Narsingdi and Bhaluka and Trishal areas of Mymensingh have been facing severe gas crisis, according the request letter sent by the Bangladesh Ceramic Manufacturers & Exporters Association (BCMEA).

"The production of ceramic tableware, tiles, sanitary ware and ceramic bricks in 22-25 factories is being disrupted due to severe gas shortages," the BCMEA said.

Ceramic goods-manufacturing units require gas supply pressure at 15 psi (pounds per square inch), whereas the pressure in those areas fluctuate between three and zero only.

"In consequence, the production loss in those areas is estimated at Tk 200 million every day," he said.

Ceramic is a gas dependent manufacturing industry as natural gas constitutes 10 to 12 per cent of total production cost.

Kilns in the ceramic industry need 24-hour uninterrupted gas supply to burn the products at 1200 centigrade at the desired PSI.

"Whenever the required pressure slides down, the incomplete products inside a kiln become wastage, even a kiln needs 48 to 72 hours to resume production in full swing after a halt," the BCMEA said, adding that sometimes an industry owner has to encounter severe trouble due to inoperative machinery.

This disruption could also lead to some entrepreneurs becoming bank defaulters as well as a conflicting situation between lenders and industry. This could also result in an increased number of cases at the financial institutions.

Contacted, BCMEA General Secretary Irfan Uddin told the FE that the northern region of Dhaka accommodates the highest number of factories, so they face the severe gas crisis.

"The situation in some other parts, including Narayanganj, is also not favourable," he said.

The government increased the gas price per cubic meter to Tk 30 from Tk 13, causing a problem for the gas-based industry, he said.

"We had to accept the higher tariff with an expectation that we would get uninterrupted supply," he said with lamentation. Replying to a query on the scope of using cylinder gas, he said this is not viable.

"This will lead to a hike in the prices of finished goods which is not feasible as local manufacturers sustain amid a tight competition from the imported ceramic ware," he said.

According to sector insiders, there are around 70 ceramic factories across the country. Of them, a handful in Habiganj and Bhola get gas at stable pressure.

With the market size of Tk 80 billion and investment of Tk 170 billion , the local ceramic sector has created around 0.5 million direct and indirect jobs.​

 

[Saif]

Unlocking ceramic industry's potential

Ceramic products have undergone a remarkable transformation in recent years. Once viewed as a luxurious addition to a home or building, they have become a must-have for many consumers. This shift is driven by a growing appreciation for the unique benefits ceramics offer, particularly in the areas o

thefinancialexpress.com.bd

Unlocking ceramic industry's potential
ATIQUL KABIR TUHIN
Published :
Jul 03, 2024 21:36
Updated :
Jul 03, 2024 21:36

Ceramic products have undergone a remarkable transformation in recent years. Once viewed as a luxurious addition to a home or building, they have become a must-have for many consumers. This shift is driven by a growing appreciation for the unique benefits ceramics offer, particularly in the areas of hygiene, aesthetics, and durability.

Driven by increasing demands, the Bangladeshi ceramic industry has experienced remarkable growth in recent decades. Prior to 2000, the country relied heavily on imports, spending significant foreign currency to meet over 80 per cent of its ceramic product needs. Today, a thriving domestic industry caters to over 85 per cent of local demand, with the size of the local ceramic market estimated at around Tk 80 billion.

Comprised of 70 companies with a combined investment of Tk 170 billion, the local ceramic sector is a significant job creator, employing roughly half a million people directly and indirectly. These companies not only cater to local demands but also contribute to foreign exchange earnings, with Bangladeshi ceramic products reaching over 50 countries.

However, it is disheartening that the ceramic industry is now facing a huge challenge due to a severe gas crisis. According to a report published in this paper, factories across key production hubs like Dhaka, Gazipur, and Narsingdi are struggling to maintain operations due to a critical shortage of natural gas, a vital ingredient in the ceramic manufacturing process.

Industry estimates suggest that nearly 25 ceramic factories in the affected areas are facing a daily production loss of Tk 200 million as a consequence of the erratic gas supply. This disruption threatens the competitiveness of local manufacturers in both domestic and international markets. The Bangladesh Ceramic Manufacturers & Exporters Association (BCMEA) has urged the government to take immediate action to ensure uninterrupted gas supply for these factories.

It is worth mentioning that ceramic production relies heavily on natural gas, which accounts for 10-12 per cent of the total production cost. Ceramic kilns require a constant gas supply pressure of 15 psi (pounds per square inch) for 24 hours to properly fire the products. However, the current gas pressure in affected areas fluctuates between 0 and 3 psi, rendering production impossible.

The consequences of this crisis extend far beyond production stoppages. When gas supply is interrupted suddenly and some products remain incomplete within kilns, those products become unusable. Moreover, restarting a kiln after a halt takes 48-72 hours, further impacting production efficiency. The problem has become so acute that industry insiders fear that gas crisis could potentially lead to loan defaults by ceramic factory owners.

The crisis is most severe in the northern region of Dhaka, where many factories are concentrated. The industry owners have recently accepted the gas price hike from Tk 13 to Tk 30 per cubic meter with the hope of improved supply, but in vain. Shifting to liquefied petroleum gas (LPG) cylinders is also not a viable solution, as it would significantly increase production costs, making Bangladeshi ceramic products less competitive in the market.

Local industries have been facing gas crisis for an extended period, a situation that hinders their ability to operate efficiently. The government began importing liquefied natural gas (LNG) in late 2018 to address the domestic supply shortfall. LNG import, however, was complicated by the Russia-Ukraine war, which triggered a dramatic surge in global gas prices. This forced the government to temporarily halt purchase of LNG from the international spot market. In recent months, however, global LNG prices have declined to some extent, but experts think the long-term solution to gas crisis lies in domestic gas exploration and infrastructure development.

Despite the ceramic industry's amazing growth over the years, export earnings from this sector remain modest, totalling only $43.39 million in FY23. Industry insiders believe the sector holds immense potential to replicate the success of Bangladesh's Readynade Garments (RMG) industry and become a major export earner. They emphasise the need for policy support on a par with the RMG sector to unlock this potential.

Apart from ensuring a stable gas supply, industry leaders are also calling for the removal of the supplementary tax on ceramic tiles, arguing that ceramic products have shifted from being luxury items to essential goods. Currently, ceramic tiles face a supplementary duty of 15 per cent, while sanitary products incur a 10 per cent duty. In addition, the industry bears more than 30 per cent in other duties and expenses. They advocate for the withdrawal of these duties, arguing that the cost of all construction materials, including steel and cement, has risen. Removing the supplementary tax would enable ceramic products to be sold at lower prices, boosting sales and ultimately increasing government revenue.

As Bangladesh approaches its graduation from Least Developed Country (LDC) status in 2026, diversifying its export basket is no longer an option, but a vital imperative. A diverse export portfolio acts as a key engine of economic growth as well as a shield, insulating the economy from sudden drops in demand for specific sectors.

Currently, Bangladesh relies heavily on the Readymade Garment (RMG) sector, which contributes over 84 per cent to its export earnings. Should this sector encounter difficulties due to unforeseen changes in the international market, it could destabilise domestic income and employment levels. In this context, the ceramic sector holds immense potential to contribute to a more diversified export landscape.​

 

[Saif]

Ceramic industry in deep trouble

The ceramic industry is a deeply fossil-fuel driven industry, i.e. gas-dependent. It cannot be run on solar power. In fact, no heavy industrial production unit can for that matter. And while the government keeps harping about renewable energy as being the next big thing, industry suffers in silence

thefinancialexpress.com.bd

Ceramic industry in deep trouble
SYED MANSUR HASHIM
Published :
Jul 05, 2024 21:47
Updated :
Jul 05, 2024 21:47

The ceramic industry is a deeply fossil-fuel driven industry, i.e. gas-dependent. It cannot be run on solar power. In fact, no heavy industrial production unit can for that matter. And while the government keeps harping about renewable energy as being the next big thing, industry suffers in silence or in mute protest that falls on deaf ears. The fact of the matter is that ceramic-making factories in key areas of Dhaka, Gazipur and Narsingdi have been "struggling to continue production as they have been suffering from a severe gas crisis in recent times" according to a recent report published in this newspaper.

The ceramic industry's apex body, the Bangladesh Ceramic Manufacturers & Exporters' Association (BCMEA) has every right to feel indignant at the situation. Ceramic making is largely concentrated on gas-fired kilns but due to not only a crisis of gas but the hike in gas prices too. Indeed, the recent increase in gas prices was opposed by the industry, but at that time, the concerned ministry had promised uninterrupted supply of gas which turned out to be a fallacy. Moving to the present situation, industry experts state that some 25 factories in this area have been suffering a "production loss of estimated Tk200 million every day for the last one month due to the supply crunch of natural gas." It is only natural that ceramic manufacturers have been clamouring for sufficient gas supply in the areas of Mirpur-12, Dhamrai of Dhaka district, Tongi, Kashimpur, Bhabanipur, Bhawal, Mirzapur, Sreepur, Mawna (of Gazipur), Panchdona (of Narsingdi), Bhaluka and Trishal (of Mymensingh).

Today, the ceramic industry is an important sector with about 70 factories in operation. Only a handful of factories in Habiganj and Bhola get the require gas pressure for production. As stated by BCMEA, manufacturing units need gas supply pressure at 15 PSI (pound per square inch) but affected factories are getting at best, 3 PSI, which is hardly conducive to production. Products include tableware, tiles, sanitary ware and bricks. For normal operation, factories need kilns to have access to gas 24 hours a day that burn at 1,200 centrigrade at the required PSI. Since a constant pressure is required, what happens when the PSI goes down? Wastage of all material inside the kiln. This is unsustainable from a production point of view. Because when production comes to a halt due to this wastage happening from lower PSI, a factory must wait 48 to 72 hours before resuming production.

There is another matter that cannot be overlooked. The depreciation of the Taka against the US dollar, prices of inputs (particularly raw materials), i.e. a lot of the material that has to be imported has also shot up.

Getting back to the price of gas, price per cubic meter had been raised from Tk 13 to 30 on the promise of uninterrupted gas supply. And this turned out to be a mirage. So, not only is industry paying more than double the price per unit, it isn't getting it at the required pressure level - resulting in unsustainability of production. Is the domestic market for ceramic ware to be left to importers in that case? What is to happen to the workforce engaged in this industry and what is to happen to the estimated Tk170 billion in investments that have gone into making this industry that has been touted as one of a handful of industry capable of competing in foreign markets in the near future?

One cannot overlook the fact that domestic manufacturers cater to over 90 per cent of the domestic demand for the items produced by these factories and hence, its concerns for reliable primary energy supply cannot be ignored. There is literally no short-term solution to a problem that has been over a decade in the making. Recapping the folly of policymakers cannot be overstated with the emergence of the all-powerful import lobby for fossil fuel rose through the ranks of policymaking to convince the government that there was no need to explore domestic resources of natural gas (in what geologists have stated umpteen number of times as a natural gas-rich country).

Today, the ceramic industry is finding out to its dismay what it means when the country doesn't have enough foreign exchange to buy natural gas from foreign markets. Industrialisation in the country is in danger of stopping in its tracks- not just for domestic producers but for foreign investors too because there simply enough gas to go around. In the midst of this crisis, active foot-dragging efforts are in play to arrest energy wastage in a number of gas-guzzling plants that have outlived their operational lives and are grossly energy-inefficient.What other proof does the State need to enact measures to improve energy efficiency across the board? Ample studies exist on what needs to be done to save gas, so that it may be diverted to industries that are starving of it, but does the political will exist to save industry? That is the question.​

 

[Saif]

Ceramics industry reeling from three-pronged assault

The ceramics industry has been desperately seeking respite from a spate of crises in recent months, but their woes have only deepened due to a worsening gas crisis.

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Ceramics industry reeling from three-pronged assault

The ceramics industry has been desperately seeking respite from a spate of crises in recent months, but their woes have only deepened due to a worsening gas crisis.

One of the major problems facing the industry has been brought on by inflationary pressures, which have eaten away at local demand for ceramics. Annual inflation rose to a 12-year high of 9.73 percent in fiscal year (FY) 2023-24, the highest since 2011-12, according to the Bangladesh Bureau of Statistics.

According to industry insiders, this has caused sales of ceramic products to plunge by 15 to 20 percent over the past four to five months.

Furthermore, there has been no relief from international buyers. On the contrary, exports of ceramic products declined by around 25 percent, according to the latest data.

Further exacerbating the situation over the past two months is the fact that ceramic industries in four districts have been contending with massive productivity losses due to a gas crisis. Industry insiders said they were counting production losses amounting to Tk 20 crore per day.

Exports of ceramic products fell to $30 million during the July-May period of FY24 compared to $39.86 million the prior year, showed data from the Export Promotion Bureau.

Further exacerbating the situation over the past two months is the fact that ceramic industries in four districts have been contending with massive productivity losses due to a gas crisis.

Industry insiders said they were counting production losses amounting to Tk 20 crore per day.

"Around 25 ceramic factories, located in Dhaka, Gazipur, Mymensingh and Narsingdi, have been getting insufficient gas pressure for the past two months," said Md Mamunur Rashid, senior vice president of the Bangladesh Ceramic Manufacturers and Exporters Association (BCMEA).

He said ceramics-makers normally require 15 pounds per square inch (PSI) of pressure to maintain product quality but they are getting only 7 to 8 PSI.

As a result, around 7 percent of products did not pass the quality inspection previously, but that number has ballooned to 20 percent due to the crisis, he said, adding: "Our profit declined by at least 25 percent due to production being hampered."

He also highlighted that production had dropped by as much as 40 percent in some factories due to inadequate gas supply, which comes from the Titas Gas Transmission and Distribution.

Rashid also pointed to a number of other factors that were keeping the industry from thriving, such as import duty on raw materials ranging from 5 to 25 percent, value-added tax of 15 percent on produced goods, and supplementary duty of 15 percent.

Besides, high interest on working capital and on credit for the procurement of capital machineries pushed the industry into further difficulties.

Against this backdrop, the BCMEA requested the government to take urgent steps to ensure normal supply of gas.

Md Sirajul Islam Mollah, president of the BCMEA, wrote to the Ministry of Power, Energy and Mineral Resources about the gas crisis that has been plaguing the ceramics industry since May.

Mentioning that production was being disrupted, he added that the gas pressure sometimes drops from 2 to 3 PSI to near zero.

Mollah explained that ceramics is a gas-dependent industry and natural gas is one of the primary raw materials. It is used as fuel and accounts for 10-12 percent of the total cost of production.

He also said kilns or furnaces need uninterrupted gas supply for 24 hours to prepare ceramics products since firing is done at 1,200 degrees Celsius.

"Without a certain level of pressure, it is not possible to continue production processes."

When the pressure reduces, all the products inside kilns are immediately destroyed, he stated. Additionally, it takes a minimum of 48 hours to 72 hours to restart the kiln once it shuts down. Sometimes, valuable equipment is destroyed, causing huge financial losses, he added.

Irfan Uddin, director of FARR Ceramics Ltd, said production losses had contributed to lower exports.

"If we do not gas as required, we can't ensure quality of production. It is not possible to export substandard products as it is a matter of the industry's image," he said.

So, the volume of exports reduced substantially this year.

Irfan Uddin, also general secretary of the BCMEA, added that it was unfeasible to use alternative fuel sources like liquefied natural gas or compressed natural gas because it would increase the cost of production by over 25 percent.​