Over Tk 30,000 cr investments in LPG sector at high risk

Market shrinking day by day

Mahmuz Emran: Thirty companies in the country have invested more than Tk 30 thousand crore in the Liquefied Petroleum Gas (LPG) sector. In the first eight years of the last decade, the growth of this sector was from 25 to 79 percent. Big companies invest in this sector after seeing such growth in market research. The last two years have changed all calculations. Growth is at a standstill. In 2022, the growth of this sector is only 6.6 percent. Which was 13 percent in the previous year as well.
According to the sector concerned, the price of LPG in the international market has increased abnormally due to the effect of Russia-Ukraine war. At the same time, the dollar crisis in the country and the increase in oil prices have increased the cost of transportation. Which is putting this sector in bad condition. LPG cylinder prices have increased in the country due to price adjustments.
This has reduced the demand of cylinders compared to earlier.
Beximco LPG is one of the country’s companies in the LPG sector. According to the company’s market survey data, the demand for LPG in the country was 80 thousand tons in 2013. Which increased to 1 lakh 40 thousand tons the next year. The following year, the maximum demand increased by 79 percent to two and a half lakh tons. In this way, the demand of LPG in this country will be 12 lakh 30 thousand tons in 2020.
But in 2021, there was a shock in the growth trend. That year saw a growth of 13 percent, the lowest in previous years. That year the demand stood at 13 lakh 94 thousand tons. And in the last year (2022) growth has been at the rate of 6.6 percent. The demand is 14 lakh 2 thousand tons.
According to company information, now the top LPG companies in the country are Bashundhara, Omera, BM Gas, Jamuna, Fresh, Beximco, Potromax, Unigas and GMI. The market share of these nine companies is about 80 percent. On the other hand, another 21 companies occupy 20 percent of the market. However, this market has become quite competitive among the top companies. No company has a single market share of more than 15 percent. Each is fighting in the market with shares very close to each other.
Mehdi Hasan, Chief Marketing Officer of Beximco LPG, told that no sector in the country has ever seen such growth as the LPG sector. However, this very promising sector has suddenly stopped in the last two years. The sector has faced major problems due to the rise in prices in the international market due to the Russia-Ukraine war, the dollar crisis in the country and the increase in transportation costs.
He said that while the average price of LPG in the world market was $401 per ton in 2020, it became $636 the next year and $735 in 2022. Which is almost double in three years. Apart from this, the cost of transportation has increased by 28-30 percent due to the increase in container fares. On the other hand, LC and LC have to be settled by spending Tk106 to Tk110 per dollar in the country.
Mehdi Hasan said that this price has put additional pressure on the consumer. Again, the trend of household LPG consumption has decreased. Those who are already using it are looking for an alternative system. No one is using LPG unless it is very necessary in villages. That’s why the sales of the companies are not good now.
Two of the country’s leading business groups, City and United, have recently invested in the country’s LPG sector. Turkey’s Igaz Company has jointly built an LPG factory in Chittagong with United Group. Citigroup has set up their factory in Hossaindi Economic Zone named Fresh LPG in 2019. Where LPG bottling capacity is one lakh ton.
Regarding the business, Fresh LPG Chief Operating Officer Nurul Alam told, “We have invested more than Tk 1000 crore in this sector. I dream about it a lot. Energy demand is increasing day by day. The earlier growth in this sector attracted Citigroup to the business.
But in the last two years, our growth has slowed down. Where earlier there was 65 percent growth, now it has come down to 10-15 percent. Now the company has no net profit. Because, the company is giving a lot of subsidies on the cylinder in the beginning. I am making a cylinder for Tk 2800 and selling it for Tk 1000.
Nurul Alam said that every business is at risk in the current situation. We hope that this situation will end and the good days of LPG business will return again.
According to the data, about one and a half crore families of the country are directly and indirectly involved with LPG. The companies are selling 80 to 85 lakh cylinders (of 12 kg) in the country every month. Currently, the price of LPG is much higher than normal. Because of that, the sales of cylinders have not increased but have now decreased by 20 to 25 percent.
The use of LPG in vehicles is also increasing in the country in the last few years. Currently, all the LPG companies together have more than five hundred filling stations. The demand of LPG in these stations is 10 to 12 thousand tons per month. However, since last November in a decade, some users have cut back as LPG prices have been higher.