Banking Khabar | Kathmandu | Jestha 5, 2082
Nepal’s cement industry, long battered by oversupply and dwindling demand, is finally showing signs of financial improvement, thanks to a modest rebound in the construction sector. According to the National Statistics Office, the construction industry, which contracted by 2.2% in fiscal year 2080/81, is projected to grow by 2.21% in 2081/82.
This slight revival has positively impacted the financial health of publicly listed cement companies. Of the four listed companies, two have reduced their losses, while the other two reported increased profits. As a group, the sector has shifted from negative to positive net earnings—driven by a combination of increased sales and reduced production costs.
Post-Earthquake Boom and Bust
Following the 2072 earthquake, the surge in reconstruction activities spurred heavy demand for cement, prompting existing companies to expand capacity and new ones to enter the market. However, once the reconstruction wave subsided around 2079, demand plummeted, leaving producers with excess inventory.
“Manufacturers were forced to sell below cost just to clear stock within the required timeframe,” said Raghunandan Maru, Chairman of the Cement Manufacturers’ Association. “Although this offered short-term relief to consumers, it pushed producers into financial distress.”
The industry also struggled with high bank interest rates, which doubled in some cases, and weak market demand, making last year one of the toughest periods for cement producers. “Until the first quarter of this fiscal year, the situation remained dire,” Maru added. “Although interest rates have since declined, boosting sales volume is still a major challenge.”
Underutilized Capacity and Structural Issues
Nepal is home to nearly 60 operational cement plants, but about 70% of them are running at below 50% capacity. According to industry insiders, key obstacles include frequent power cuts, a coal shortage, and sluggish market demand. High competition also forces companies to operate with thin profit margins.
Despite the challenges, some improvement is evident this year. Vishnu Neupane, Chairman of Shivam Cement, noted a slight increase in sales compared to last year’s slump. “Things are better than before, but still far from ideal,” he said. “Sales remain relatively low, though the construction season has helped boost demand.”
Local Use, Export Struggles, and Subsidy Gaps
Industry leaders are urging the government to promote domestic cement use, especially for public infrastructure like concrete roads, which last longer and support local producers. “If the government prioritizes concrete roads, it will stabilize the industry,” Maru emphasized.
On the export front, Nepali cement has gained traction in India. However, some brands are currently unable to export due to the expiry of their BIS (Bureau of Indian Standards) certification, which must be renewed every two years. Several certifications are set to expire by July, posing another challenge.
The government had earlier announced an 8% subsidy on cement exports, a move welcomed by the industry. However, manufacturers report they have yet to receive the promised incentive. “Though the subsidy was announced, we haven’t received any disbursements,” said Maru.
From Shrawan to Chaitra of the current fiscal year, Nepal exported Rs. 1.55 billion worth of portable cement, slightly up from Rs. 1.49 billion during the same period last year. However, clinker exports fell significantly—from Rs. 1.47 billion last year to just Rs. 640 million this year.
Call for Policy Reforms and Timely Payments
Industrialists argue that government policies must be more industry-friendly. They have called for mandatory use of domestic cement in public construction and a shift from asphalt to concrete roads. They also stress the urgent need for capital expenditure to rise during the active construction season of Chaitra to Asar.
So far, only 34% of the planned capital expenditure has been executed, even with just two months left in the fiscal year. Construction contractors also report delayed payments for government projects, which directly affects suppliers, including cement manufacturers.
Furthermore, unresolved land ownership issues have become a bottleneck for some cement companies. A total of 38 files related to land ownership are pending at the Forest Department, putting certain industries at risk of closure.
Outlook: Cautious Optimism
While recovery is still fragile, the cement industry is showing early signs of resilience. However, continued progress depends on steady demand, timely government spending, export facilitation, and regulatory reforms—particularly in land rights and infrastructure planning. Without these, the revival may remain temporary.
