Like housing developers, manufacturers of construction materials are also awaiting revival of the sector. When the housing sector was at its prime five years ago, it made a significant contribution to their sales, but a slowdown in the sector has hit them hard.

Thanks to increasing trend of building concrete houses in rural areas amid a surge in remittance, the manufacturers of construction materials are somehow sustaining their business.

Besides the real estate recession, these industries are also facing other problems such as power shortage, late budget announcement, and slow government spending.

“Although our plants are not operating in full capacity, we are somehow meeting the domestic demand,” said Kiran Sakha, director of Sakha Steel Industries. “Most of our products are consumed in private and commercial buildings.”

Unlike in the past when the domestic market used to depend on imported cement, the country is lately heading towards self-reliance in cement. Domestic cement is estimated to have some 80-85 percent market share. Around Rs 50 billion has been invested in cement factories, according to the Cement Producers’ Association. There are around 80 cement makers in the country.

“The demand for construction materials saw a nominal increase this year despite the central bank’s move to ease home loans,” said Jagannath Dahal, brand manager at Jagadamba Cement Company.

Dahal said a decline in people’s purchasing power amid high inflation is also affecting demand for apartments and individual homes, besides problems like load-shedding, fuel price hike and transporters’ syndicate. He said growing competition in the domestic market has also forced manufactories to operate on a thin profit margin.

Jagadamba has a capacity to produce 44,000 bags of cement daily. The company sells Jagadamba PSC, Subhashree and Ultra Premium OPC brands of cement in the valley, while Force, Jagadamba Ultra and Force F2R are sold outside.

According to the Nepal Land and Housing Developers’ Association (NLHDA), 12-15 new housing projects have been launched lately. This has also given some hope to the makers of construction materials.

“The situation is improving lately as people are once again buying homes,” said Sakha, director of Sakha Steel Industries. “But the construction material suppliers are still struggling.”

As far as steel is concerned, there are around 30 steel manufacturers registered in Nepal, out of which 16 are in operation. An estimated 400,000-500,000 tonnes of steel products is sold annually.

The success of steel business in the past lured many business houses such as Panchakanya Group, Golchha Organisation and Jagadamba Group, among others, into this sector. The growth started after 1990, making the country self reliant in steel. The business gained momentum mainly in 2000-2010 along with the boom the housing business. But it is also now facing difficulties with the slowdown in the housing sector.

However, things seem to have been changing lately. With the central bank relaxing home loans provision, demand has risen lately and developers are completing their half-done projects. Work has begun to complete around 3,500 housing units, according to the NLHDA.

“There has been some improvement in the paints business recently,” said Saibal Ghosh, country manager of Berger Jenson & Nicholson (Nepal). To cater to the growing demand, Berger launched three new products, including Silk Luxury Emulsion and Primer Plus Seal, this year. The company claims to have a 27 percent market share in the domestic paints industry.

The annual demand for paints (including decorative and industrial category) stands at more than 35,000 metric tonnes. The domestic market is dominated by four major players — Asian Paints Nepal and Berger Jenson & Nicholson Nepal, Pashupati Paints and Nepal Shalimar Paints. Berger Paints produces 20,000 kl of paints annually. According to Ghosh, most of them are sold for decorative purposes.

source: the kathmandu post,8 may 2014