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(Project Submission Date: 15th December, 2015)
CHAPTER III: RESULTS (Contd.)
- After the Gorkha Earthquake, there were 2 recorded fatalities and 6 injuries in brick factories all over the nation. Extensive major and minor damages to chimneys, kilns and green bricks were recorded in factories throughout the nation. The total damage loss was estimated to be NPR 1,126,111,700. Please refer the Table 3 below for a detailed earthquake damage loss estimation of brick industries in Nepal.
Table 3. Earthquake damage loss estimation of brick industries in Nepal (Source: FNBI)
- At least 75% monthly loss of revenue was estimated for individual brick factories due to reduced demand, production and sales. There are around 300,000 workers are employed in brick factories throughout the country. Although workers have started returning to factories, approximately 95% job loss was estimated in the following 6 months after the earthquake. Please see Table 4.
Table 4. Information related to employee casualty, damage loss, revenue loss and employment loss
- Most of the brick factories are unable to recover even after 6 months. Over 95% of the factories are not in full operation due to the earthquake damages incurred as well as lack of workers and fuel after the economic blockade. Before the earthquake an average 4 million bricks were produced annually by individual brick factories in Nepal. Around 850 brick factories all over the country produced about 3.4 billion bricks every year.
- It is estimated that the national annual demand for bricks all over the country was around 3.57 billion before the earthquake. It is also predicted that in coming days the annual demand would increase by at least 30% after the earthquake. Depending on varying quality of bricks, the current brick price fluctuates between NPR 8 to NPR 12 per piece (excluding VAT and transportation). Brick prices are claimed to be stable before and after the earthquake. Please see Table 5.
Table 5. Information related to business recovery, production capacity, demand and market prices
- Except for some minor injuries to employees and their families, there were no significant casualty in cement industries. Only minor damages were recorded in some factories ranging from NPR 50,000 to NPR 15 million in loss. The damages were mostly to the sheds and boundary walls. Overall the total damage loss is estimated to be over NPR 100 million.
- Following the Gorkha Earthquake, individual factories incurred 25% to 95% loss of revenue due to reduced demand, production and sales. It is estimated that the industry experienced a total revenue loss of NPR 3 billion in the first 3 months alone. Over 10,000 workers are employed in cement industry all over the country. Around 25% workers are believed to have lost their job after the earthquake. Most of them are daily wage workers. Please see Table 6.
Table 6. Information related to employee casualty, damage loss, revenue loss and employment loss
- Since the damages were not significant, most of the factories were able to recover their production within a couple of weeks. The estimated production downtime due to the earthquake ranged from 2 days to 2 weeks for different factories, majorly due to the employees’ fear of future shakings. Presently there are 46 cement factories all over the country. Before the earthquake, the total annual production capacity of the entire industry was around 4 million MT. Initially, because of the earthquake, production capacity of individual factories has come down by only 30% to 35%. Later, due to government restrictions on construction and reduced demand the production has significantly dropped by 75%.
- Before the earthquake the country had an estimated demand of around 5 million MT cement annually. In the coming days the demand is expected to shoot up by around 25% due to reconstruction activities. The market price of OPC Cement ranged from NPR 650 to NPR 750 per bag before the earthquake. Due to the hike in transportation cost and fuel crisis the current cement price is around NPR 800 per bag. Please see Table 7.
Table 7. Information related to business recovery, production capacity, demand and market prices
Reinforcement Steel Bar Industries
- There was no earthquake casualty reported by the factories surveyed for this paper. Only minor damages were recorded in iron & steel factories all over the country. The damages were mostly done to the sheds and boundary walls of the plants. Following the earthquake, individual factories incurred a drastic 80% to 90% loss of revenue due to reduced demand, production or sales.
- It is estimated that the rolling mill industry as a whole experienced a total revenue loss of over NPR 10 billion in the first 3 months after the earthquake. There are 16 reinforcement steel bar industries in the country. Depending on the size of the organization, the number of workers employed in them varied from 200 to 3000. Except for few exceptions where employees left the job out of earthquake fear, the crisis did not cause any major layoff in the industry. Please see Table 8.
Table 8. Information related to employee casualty, damage loss, revenue loss and employment loss
- After the earthquake the production was interrupted for at least 1 month or as long as 6 months in major iron & steel industries. The cause of interruption was mostly absent employees, reduced demand and government imposed restriction on new constructions. The individual factories around the country experienced an estimated 33% reduction in their production capacity. The reduced production capacity was mainly caused by the lack of raw materials, fuels, employees as well as reduced demand for the reinforcement steel bars.
- Before the earthquake the country had an estimated demand of around 875,000 MT every year. In the following months after the earthquake the demand has gone down as low as 50% of the total annual demand of the country. The unit market price has decreased by approximately 10% in the aftermath of the earthquake. The average market price of reinforcement of steel bar was NPR 70 per kg before the earthquake. The current market price is around NPR 65 per kg excluding VAT. Please see Table 9.
Table 9. Information related to business recovery, production capacity, demand and market prices
CGI Sheet Industries
- During the survey, there was no earthquake casualty reported by the CGI Sheet factories. Besides minor damages to the sheds and boundary walls of the factories, there were also some serious damages reported such as spill of molten zinc and severe damage to the coal gasification plant. The estimated total loss is over NPR 100 million.
- There was no evident revenue loss since the need for CGI Sheets increased due to skyrocketing demand of temporary shelters right after the Gorkha Earthquake. There are 4 major CGI Sheet industries in the country and no loss of employment recorded due to the earthquake. Please see Table 10.
Table 10. Information related to employee casualty, damage loss, revenue loss and employment loss
- Besides first couple of weeks of production interruption due to minor facility damages and fear among the employees, businesses did not face major hardship to recover from the earthquake crisis. Due to increased demand, CGI Sheet industries had to increase their production by nearly 80% in the first few months following the earthquake.
- Before the earthquake the country had an estimated demand of around 150,000 MT CGI Sheets every year. Because of the steep rise in demand, the unit price of the CGI Sheets increased slightly by around 2% to 3% immediately after the earthquake. Later the market prices were dictated by the varying transportation cost in different districts. Please see Table 11.
Table 11. Information related to business recovery, production capacity, demand and market prices
GI Wire Industries
- There was no major or minor casualty reported by the factories surveyed for this study. After the earthquake, there was only minor or no damage incurred by the GI Wire industries in Nepal. Few minor incidents of boundary wall collapses were reported.
- Around 50% to 70% loss of revenue every month was reported due to reduced sales in the months following the earthquake. Altogether there are 5 major GI Wire industries throughout the country. An estimated 2,500 employees are working in them. No job loss was reported by the factories due to the earthquake. Please see Table 12.
Table 12. Information related to employee casualty, damage loss, revenue loss and employment loss
- GI Wire businesses did not face major hardship to recover from the earthquake crisis. Due to minor facility damages and fear among the employees, there was production interruption for the first couple of weeks after the earthquake. The estimated annual capacity of all the CGI industries in Nepal is 78,300 MT. Due to reduced demand and insufficient power supply, the production dropped around 9% after the earthquake.
- Before the earthquake the country had an estimated demand of around 25,000 MT of GI Wires every year. In the months and years following the earthquake the demand is expected to rise by around 50%. There are 3 major grades of GI Wires available in the market namely, heavy-Zinc, medium-Zinc & commercial grade. The average market price of the popular heavy-Zinc grade before the earthquake was NPR 86.5 per kg while after the earthquake it is around NPR 77 per kg. Please see Table 13.
Table 13. Information related to business recovery, production capacity, demand and market prices
A comparison of nationwide projected production and demand
A comparison of nationwide production and demand projection for construction materials after the earthquake was performed. The Projected Annual Production was calculated by looking at the production trend of first 3 months after the earthquake. Post Disaster Need Assessment (PDNA), Government of Nepal has estimated the Projected Demand for the Earthquake Reconstruction which was further taken into account while calculating the Total Annual Projected Demand after the Earthquake. Please see Table 14 below.
Table 14. A comparison of nationwide production and demand projection for construction materials
Supply and demand of construction materials
In coming days, there will be massive rise in building construction activities for several years as over 600,000 houses will be constructed and nearly 250,000 buildings will be either repaired or retrofitted. The two critical factors to be considered are the availability of construction materials and construction labors in the country.
- Looking at the trend of first 3 months after the earthquake, the brick factories seem to be in miserable condition with only 170 million projected annual production nationwide. The national annual demand for bricks before the earthquake was 3.57 billion while the estimated annual production capacity was 3.4 billion. It will be hard to meet the annual projected demand of 4.77 billion bricks. PDNA estimates that around 25% of this demand can be compensated by the recycling of the salvage. On the other hand Federation of Nepal Brick Industries (FNBI) claims that with an expected 25% increase in existing total capacity, around 5 billion bricks could be produced within next year if economic and climate conditions are favorable.
- In the months following the earthquake, due to the government regulations on construction bar, the demand for cement drastically came down to negligible numbers, although total annual projected demand is around 7 million MT. Based on the trend of first 3 months after the earthquake the projected annual production is mere 1 million MT. The nationwide annual demand before the earthquake was around 5 million MT and Cement Manufacturers’ Association of Nepal (CMAN) estimates that due to reconstruction activities there will be only 25% hike in total demand. As per CMAN this demand can be sustained by Nepalese cement factories as most of them were operating almost 50% below their installed capacity even before the earthquake.
- The total annual projected demand for reinforcement steel bar is over 1 million MT which comprises the annual demand of 875,000 MT and reconstruction demand of around 140,000 MT. Looking at the first 3 months’ production trend after the earthquake, only 757,770 MT of reinforcement steel bar production is expected next year. Since the current reduced production is mainly due to fuel crisis, power shortage and supply-chain disruption, the future reconstruction demand can be met successfully if the situations are favorable.
- The total annual projected demand for CGI Sheets is around 240,000 MT which comprises the annual demand of 150,000 MT and reconstruction demand of around 90,000 MT. In coming months, the demand is expected to stay more or less the same as new constructions have come to a halt while the demand for new shelters has gone up. CGI Sheet industries had to increase their production by nearly 80% in the first few months after the earthquake. Following the trend, the projected annual production after the earthquake is estimated to be 421,200 MT which can sufficiently meet the reconstruction demand of the country.
- The total annual projected demand for GI Wire is 35,000 MT which comprises the national annual demand of 25,000 MT and reconstruction demand of around 10,000 MT. From the first 3 months’ production trend after the earthquake, 71,253 MT of GI Wire will be produced next year. Even with the current reduced production capacity, Nepal can sufficiently meet the reconstruction demand for GI Wires.
Demand for construction workers
The reconstruction phase can also be seen as an opportunity for job creation. International Labor Organization (ILO) estimates that there are one million workers already involved in the housing sector. PDNA estimates that housing reconstruction may generate up to 352 million workdays over the next five years. Since the major reconstruction will occur in first 3 years, it is estimated that 700,000 construction workers will be required for reconstruction alone.
(To Be Contd. ….)