With about 10 days to the deadline given to cement manufacturers in the country to bring down the cost of the product by President Goodluck Jonathan, a BusinessDay market survey has revealed that the retail price of cement has gradually dropped from 2,400 to N1, 900 – which is about N500 difference. A 50-kg bag of cement which as of April and May sold for N2, 400 at the open market in Lagos has now dropped to N1, 900 - which represents a drop of about 21 percent.
This means that the price is gradually returning to about 1, 800 for which it sold in January, this year.
BusinessDay’s visit to some of the major markets in Lagos shows that the retail price of the product is now between 1,850 and 1,900, depending on the number of bags of cement bought.
Tunde Ayodele, a cement dealer in Festac area of Lagos, said, “We buy the product from Apapa to Festac at the rate of 1,600, and for someone to buy from Apapa, you must be ready to buy up to 300 bags; that is a trailer load of the product and sell at the rate of N1, 900 per bag. As of May this year, we sold cement for N2, 400.”
At Alagbado area of Lagos, Friday Alaba, another cement dealer and block maker, said the price of blocks was only affected by a N10 difference when the price of cement was about N2, 400 in May, “but now that the price of cement is coming down, nine inches block may sell for N120, while six inches will be about N110.”
Some of the manufacturers had blamed the high cost of the product on the price of diesel, which has doubled over time to between N160 and N170 per litre from its previous price of N80.
“What you have to look at is that cement is a very cheap product at company levels. For example, in our factory, we sell at N1, 500 but because diesel has gone up from N80 a litre to N160 and N170 a litre, transporters have taken advantage of this to hike the price and charge more. If they charge more than double on a product that you sell at N1, 500, then you can imagine the outcome,” Alaba explained.
Meanwhile, as part of efforts to further reduce the price, manufacturers had earlier met with distributors on ways to reduce cost and have already began to increase cement depots nationwide and increase the number of trucks to supply their distributors.
Dangote Cement, which is the largest manufacturer in the country, has so far deployed 5000 trucks for cement haulage in about 50 depots in the country, while Lafarge WAPCO plc too is adding over 1000 trucks, also for cement haulage in the country and thus, subsequently increase the number of trucks transporting the product all over the country.
The manufacturers also blamed the closure of Kaduna Refinery in February and April as being part of the factors that affected companies that use LPFO for production, as Benue Cement factory was shut down for two weeks. This closure, it was gathered, impacted negatively on the production and supply of the product.
Joseph Makoju, president, Cement Manufacturers Association of Nigeria (CMAN), had earlier told BusinessDay that the price was not for the group to decide, but stressed that the CMAN had a responsibility to ensure there was enough cement in the market, because when there was the scarcity of any product, there was bound to be increase in price.
Makoju had then assured that with enough cement supply in the market, the price will gradually come down.
According to him, now that the Kaduna Refinery is back to production, LPFO supply now restored to BCC plant in Benue State, the plant is now producing at full capacity and supplying the market with an average production of over 250 trailers of cement daily.
Giving a further assurance of an expected fall in price, sources readily mentioned the Ibeshe plant of Dangote Cement, in Ogun State with 6 million metric tons per annum capacity and which is presently in its final stages of completion and commissioning will commence full production and supply by August this year.
The manufacturers have also estimated that a supply of 17 million metric tons will be achieved this year. A number of new cement plants with combined capacity of 14 million metric tons are currently under construction and are expected to come on stream at different periods this year. They are expected to make considerable additional output from the factories.
A source in the know disclosed that for all manufacturers, their factory price remained unchanged throughout the year in spite of the rise in the cost of some inputs. Technically, price effectively came down in 2010 as companies introduced a number of discount and rebate arrangements to encourage their distributors.
To Makoju, “We do not expect anything less than 60 percent performance from most of the new plants in 2012. Investments in the industry are ongoing and if the government continues with the strict implementation of the backward integration policy, our expectation is that more new entrants will come into the business of cement manufacturing and the present tempo of growth in the cement industry will be sustained.
“The manufacturers started this year with a stock of about 1 million metric tons of cement in their various depots across the nation and also over 700,000 tons of clinker stocks in their factories. This was despite their reduced level of operations necessitated by the exigencies of the market.”
The CMAN boss noted that the backward integration policy introduced by the Federal Government in 2002 was working because it had attracted huge investments to the sector.
Makoju said Nigeria was barely producing 2 million tons of cement in 2002 before the introduction of the policy, but it now produces about 17.5 million tons annually, noting that the sector could be used to diversify the nation’s economic base if government sustains its policy in the sector.
“The country has adequate raw materials to produce cement to meet local consumption and for export. In fact, most of the manufacturers have started to construct jetties preparatory to exporting the product,” he explained.
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