Executive Summary
Nepal's cement industry is in a capacity-rationalisation cycle. Installed cement grinding capacity is estimated at roughly 22 MT/year (with around 12.3 MT/year operating across 13 integrated and 16 grinding plants per industry reporting), against domestic consumption estimated at ~8 MT/year. National capacity utilisation is approximately 35–40%, with utilisation in the Koshi/Jhapa corridor reported lower at 25–30%. In Koshi Province, multiple plants temporarily halted production through 2024–25; the state-owned Udayapur Cement (~0.4 MT/year) was closed by the government on 9 June 2025.
The industry is bifurcated. Large integrated clinker-producing players with captive limestone mines and thermal-power backup are surviving and consolidating; pure grinding units and smaller clinker-importing producers are shutting down. Two listed cement names (SHIVM and SARBTM) are investable on NEPSE; other major operators (Hongshi-Shivam, Huaxin, Maruti, Arghakhanchi, CG, Ghorahi, Riddhi Siddhi) remain private.
Three structural variables define the next several years:
- India export arbitrage — Nepal's cement is increasingly cost-competitive for export to UP and Bihar, supported by an 8% government cash subsidy (NTIS 2023). The bottleneck has been India's BIS/IS-mark certification process; export volumes were materially throttled in late 2023–2024.
- Macro tailwinds — 385 MW of hydro added in H1 FY 2025/26 (per industry reporting), ~4,000 MW of hydro under construction, NRB rate cuts, and remittance-driven household construction.
- Political fragility — government capex fell from 11.4% of GDP (FY 2020/21) to 7.8% (FY 2023/24); the September 2025 protests delayed federal capex deployment further.
Industry Structure & Market Size
Capacity & Utilisation Snapshot
| Metric | Value | Source |
|---|---|---|
| Total installed cement capacity | ~22 MT/year | Infomerics Cement Industry Sectoral Report (Aug 2025) |
| Operational integrated + grinding capacity | ~12.3 MT/year (13 + 16 plants) | CemNet industry reporting (Jan 2025) |
| Estimated domestic consumption | ~8 MT/year | Industry reporting |
| National capacity utilisation | ~35–40% | Industry reporting |
| Utilisation in Koshi/Jhapa corridor | 25–30% | The HRM Nepal |
| Clinker export to India FY 2023/24 | ~1.04 MT plus ~202,109 MT in first 5 months FY 2024/25 | Kathmandu Post |
| Cash subsidy on cement/clinker exports | 8% | Nepal Trade Information System (NTIS 2023) |
Key Players
| Company | Approximate Capacity | Listed |
|---|---|---|
| Hongshi-Shivam Cement | ~2.44 MT/year (6,000 TPD) | No (private; SHIVM holds 30% economic stake via Shivam Holdings) |
| Shivam Cements Ltd. (SHIVM) | 3,000 TPD cement, 1,900 TPD clinker | NEPSE: SHIVM |
| Sarbottam Cement Ltd. (SARBTM) | 3,000 TPD cement, 3,000 TPD clinker (standalone) | NEPSE: SARBTM |
| Huaxin Cement (Narayani) | ~3,000 TPD | No (Chinese FDI; reported total commitment USD 140M) |
| Maruti Cement | n/a | No |
| Arghakhanchi Cement | n/a | No |
| CG Cement | ~2.0 MT/year | No (Chaudhary Group) |
| Ghorahi Cement | 2,200 TPD | No |
| Riddhi Siddhi Cement | 2,200 TPD | No (Shanker Group + Ambe Group joint venture) |
| Subha Shree Jagdamba and related | ~1 MT/year combined | Acquired by SARBTM in FY 2024/25 (now consolidated under SARBTM group) |
| Udayapur Cement (state-owned) | 0.4 MT/year | Closed 9 June 2025 |
| Hetauda Cement (state-owned) | ~0.25 MT/year | No |
Only SHIVM and SARBTM are investable on NEPSE.
Demand Drivers
Cement demand in Nepal is driven by four buckets, in approximate order of weight:
- Private residential construction (~55–60% of demand) — funded substantially by remittance inflows. Sensitive to BFI lending rates; NRB policy rate cuts in 2024–25 began reviving housing activity.
- Government infrastructure (~20–25%) — roads (Narayangadh-Butwal, Nagdhunga tunnel), hydropower, airports (Pokhara, Bhairahawa — both commissioned), bridges. Capex execution has been weak (FY 2023/24 capex 7.8% of GDP vs. an 11–15% target band).
- Commercial real estate (~10–15%) — concentrated in Kathmandu Valley.
- Earthquake reconstruction overhang and post-September-2025 rebuild (~5%).
Per-capita cement consumption in Nepal is approximately 260 kg/year (estimates from industry reporting), broadly comparable to India and below China, Vietnam, and other developing-economy comparables. There is structural room for per-capita growth over a 10–15 year horizon, even if near-term demand is weak.
What Listed Producers Are Saying
SHIVM Chairman, AR FY 2081/82 (loose translation): discusses a slowdown in real estate, housing, and construction; cites local and provincial taxes, fees and duties as a friction.
SARBTM Chairman, AR FY 2081/82 (loose translation): notes the export-incentive program suspension in September 2025, the NEA dedicated-line tariff disputes, and increased dealer-receivables pressure.
Supply Dynamics
Clinker — The Cost Bottleneck
Clinker cost is approximately 60–70% of cement cost structure. Producers split into:
- Integrated producers with captive limestone and clinker kilns (SHIVM, SARBTM, Hongshi-Shivam, Huaxin, Maruti)
- Grinding-only units that import clinker from India
In FY 2080/81 SHIVM produced 521,353 MT of clinker; FY 2081/82 fell to 455,914 MT (per SHIVM AR FY 2081/82). SARBTM produced 940,516 MT of clinker in FY 2081/82, up from 736,989 MT in FY 2080/81 (per SARBTM AR FY 2081/82) — driven by Kiln-2 ramp-up and subsidiary acquisitions.
New Capacity
Major Nepal cement build-out completed roughly 2019–2023. No major greenfield capacity is publicly disclosed as commissioning between 2026 and 2028.
Indian Cement Import Pressure
Cheap PPC cement from UP and Bihar continues to enter Nepal at the border; enforcement of import duties is patchy. Sustained INR depreciation increases this pressure.
Export Potential to India
In FY 2023/24 Nepal exported approximately 1.04 MT of cement/clinker to India (per Kathmandu Post reporting). The first five months of FY 2024/25 saw another ~202,109 MT (Rs. 750.62 million in value). The 8% cash export subsidy is a meaningful margin support.
The constraint has been the BIS/IS-mark certification — India stopped issuing fresh certifications to Nepali cement in late 2023, and the issue remained unresolved into 2025. Both SHIVM and SARBTM hold BIS IS 269:2015 and IS 1489:2015 certifications. SARBTM commenced exports in 2023.
Cost Structure of an Integrated Nepali Cement Producer
| Cost Component | Approx. % of Total Cost | Direction (5-year) |
|---|---|---|
| Clinker / limestone extraction & processing | 35–40% | Stable for integrated; rising for importers |
| Coal / pet-coke (kiln fuel) | 15–20% | Up sharply 2021–23, stabilising 2024–25 |
| Electricity (NEA grid + captive thermal/diesel) | 10–12% | Volatile; NEA dedicated-line tariff disputes ongoing |
| Logistics & freight | 8–10% | Rising with diesel |
| Packaging (woven sacks) | 3–5% | Stable |
| Labour | 4–5% | Stable |
| Admin, selling, finance | 15–20% | Finance cost falling with rate cuts |
NEA Dedicated-Line Tariff Litigation
Both SHIVM and SARBTM are involved in multi-year disputes with NEA over "dedicated line" electricity tariffs:
- SARBTM contingent liability stood at NPR 862.7M at FY 2081/82 close (per SARBTM AR FY 2081/82); the case is at the Supreme Court, with management agreeing to pay a portion in installments.
- SHIVM reports NPR 66.27 crore (NPR 662.7M) under review per SHIVM AR FY 2081/82.
This is a sector-wide regulatory risk applying to most integrated producers using NEA dedicated lines.
Regulatory & Policy Environment
Supportive:
- 8% cash export subsidy (NTIS 2023).
- Government "Make in Nepal" preference favouring domestic cement in public procurement.
- BIS recognition for top producers.
Friction:
- Bagmati Province's natural-resource tax on cement sales (SHIVM has Supreme Court writs pending).
- Local (municipal) taxes on advertising and bag dispatches.
- NEA dedicated-line tariff dispute across the industry.
- India's inconsistent BIS-mark issuance throttling exports.
- Export subsidy paused after the September 2025 protests.
- Government capex slowdown post-September 2025.
Macro Sensitivities
| Driver | Direction with Cement Volumes | Current State (May 2026) |
|---|---|---|
| BFI credit growth to construction | Positive | NRB rate cuts; bank liquidity returning |
| Remittance inflows | Positive | ~25% of GDP, growing |
| Government capex execution | Positive | Recovering from FY 2023/24 lows |
| Interest rates (10-year Government of Nepal) | Negative | Falling |
| NPR/USD and NPR/INR | Inverse via clinker/coal imports priced in USD | Mildly negative |
| Hydropower construction pipeline | Positive | ~385 MW added H1 FY 2025/26 (industry reporting); ~4,000 MW under construction |
| Political stability | Positive | Fragile; new administration post-September 2025 |
Industry Competitive Dynamics
Cement globally is a near-commodity business; Nepal has four context-specific factors:
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Geography creates regional moats. Cement transport costs erode margins beyond approximately 300–400 km. SHIVM's Makawanpur plant is closest to Kathmandu Valley + Central Nepal; SARBTM's Sunwal plant is closest to Lumbini Province + West Nepal; Riddhi Siddhi is closest to Hetauda. Nepal supports 3–4 regional markets, each typically supporting 2–3 profitable producers.
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Brand and trust. Nepali home-builders perceive brand as a quality proxy. "Shivam" and "Sarbottam" command retail brand recognition; they price at a premium to generic local brands.
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Distribution depth. SHIVM reports dealer presence in nearly all 77 districts. SARBTM reports 1,500+ dealers in 56 districts across all 7 provinces, operating a direct-to-retail "micro-marketing" model. Building this kind of network takes a decade or more.
-
Regulatory licences. Limestone mining concessions and environmental permits are scarce. New entrants cannot replicate SHIVM's Makawanpur permits or SARBTM's Palpa permits.
5-Year Outlook (Scenarios, Illustrative)
The scenarios below are illustrative; they are not forecasts and probabilities are author's estimates.
Base case: demand CAGR 5–7%; capacity utilisation recovers toward 55–60% by 2030 as marginal producers exit; industry consolidates from 50+ names to a smaller number of operating producers; top 5 players capture 70%+ of demand; exports to India stabilise at 1.5–2 MT/year if BIS/IS issues resolve; EBITDA margins for top players recover from a trough toward the high teens.
Higher case: post-political-stability infrastructure cycle drives 10%+ demand CAGR; India export grows to 3–4 MT/year with trade normalisation; capacity utilisation hits 70%+ by 2029.
Lower case: capex paralysis persists; INR depreciation increases Indian cement competition; NEA tariff ruling goes against producers; demand CAGR stuck at 2–3%; even top players see EBITDA compression.
Key Metrics to Monitor (Quarterly)
- Clinker production volumes (utilisation proxy)
- Cement sales in tons (demand proxy — not just NPR revenue, which is distorted by price)
- EBITDA margin (cycle-turn signal)
- Receivables days (channel credit stress)
- India export tons (optionality activation)
- NEA dedicated-line tariff litigation status
- NRB policy rate and construction-loan growth
Sources
- Infomerics Credit Rating Nepal — Cement Industry Sectoral Report (August 2025)
- CemNet / New Spotlight — Nepalese cement producers under pressure to close (January 2025)
- Kathmandu Post — coverage of Nepali cement exports to India
- The HRM Nepal — coverage of cement export and Koshi-corridor utilisation
- World Bank — Nepal Development Update (April 2026)
- NRB — FDI in Cement Study (2021)
- SHIVM Annual Reports FY 2075/76–FY 2081/82
- SARBTM Annual Reports FY 2079/80–FY 2081/82
- Nepal Trade Information System (NTIS) — export-subsidy policy
- Electricity Regulatory Commission Nepal — context for the NEA dedicated-line tariff dispute
Research date: May 10, 2026.