Competition among cement firms leads to price drop, increased capacity

Intense competition among Nigeria’s major cement manufacturers is leading to stable and lower prices amid increased capacity by the firms as they position to meet burgeoning demand.

Dangote Cement plc, Nigeria’s leading cement manufacturing company, says it has increased its production capacity by 9 million metric tonnes per annum following the commissioning of two new production lines in Ibese, Ogun State, and one production line in Obajana, Kogi State.

UniCem, a cement manufacturer located in Cross River State, recently broke ground on an additional 2.5 million metric tonnes per annum line to double production at its plant, while Lafarge Africa has also

announced that it plans to increase capacity.

Devakumar Edwin, group managing director, Dangote Cement, who announced the new addition to their production capacity at a press conference in Lagos, also disclosed that contrary to rising costs and commodity price increases in the Nigerian market, the company had brought down the price of its cement by N100.00 per bag.

He explained that the N100 price drop applied to the company’s 42.5 cement grade only, while the 32.5 cement grade, which it would introduce into the building material market in the next few days, would be selling for N200 lower than the 42.5 cement grade.

This means that the price of a 42.5 grade bag of cement which sells at the rate of N1,700.00 off depot price, will now be selling for N1,600.00.  This also means, that the 32.5 grade bag of cement which will be selling N200 less will come to N1,400.00.

Nigeria’s cement industry will continue its growth spurt into 2020 as investment in capacity continues, in response to rapid increase in consumption in a stable-to-strong pricing environment, says Renaissance Capital.

The boom in cement consumption is anchored on economic growth in Nigeria that has averaged 7 percent per annum over the past five years, creating demand for housing, offices, roads, bridges and other concrete structures.

“The Nigerian cement market continues to grow strongly, with volumes at the end of FY13 reaching just under 22mn tpa, representing a 9.6 percent compound annual growth rate (CAGR) over the past 10 years,” said RenCap’s basic materials analysts, led by Roy Mutooni, in a research note released July 18, 2014.

The cumulative revenues of the four dominant cement makers (Dangote, Lafarge, Ashaka and Cement Company of Northern Nigeria) increased by 9.5 percent in first-quarter 2014 to N142 billion, from N129.71 billion in the earlier period.

The firms are in the sweet spot of demand for the building commodity that shows no sign of abating soon.

The release of updated data of the Nigerian economy by the NBS showed that construction grew by 14.2 percent in 2013 and 9.4 percent in 2012, with real estate growing by 12 percent and 5.6 percent in the same period, underpinning the expansion in the cement sector which comprised 1 percent of GDP in 2013 but grew by 39 percent in 2013 and 14 percent in 2012.

Dangote Cement is adding 6 million metric tonnes per annum of capacity at lines 3 and 4 in Ibese, and another 3 million metric tonnes per annum from an additional line 4 at Obajana, Kogi State.

RenCap expects consumption to reach 43mnt by 2020 (11 percent CAGR) and believe Nigeria’s per-capita consumption rate will reach 213 kg by 2020, following the 17 percent increase from 107 kg in 2011 to 125 kg in 2013.

President Goodluck Jonathan said on Tuesday in Calabar, Cross River State, that the country looked quite strong to produce 39.5 million metric tonnes (MMT) of cement by the end of 2015 and early 2016. The country now has an installed capacity of 39.9 million metric tonnes of cement.

President Jonathan, who was represented by Vice President Namadi Sambo, said this at the Line II groundbreaking ceremony of the United Cement Company of Nigeria (UniCem) cement factory at Mfamosing, Akamkpa Local Government Area, few kilometres north of Calabar, Cross River State.

BusinessDay