In response to federal government’s quest to make cement affordable, manufacturers of the commodity in the country have quickened the pace on factory expansions to boost production capacity and consequently bring about a friendly pricing regime, writes AUSTIN IMHONLELE
By the end of last month the soaring price of cement had peaked at N2, 500 a bag; a price which according to analysts,is three times higher than the going rate in most emerging markets. It took a presidential order to bring about the slight
reduction in price that became noticeable last week. Business Day gathered that members of the Cement Manufacturers Association of Nigeria (CMAN) Manufacturers are already meeting with distributors on ways to further reduce cost of cement. An industry source told Business Day that the stakeholders have already started increasing 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 cement trucks for the benefit of up to 50 depots in the country while Lafarge WAPCO plc is adding over 1000 trucks to increase the number of trucks.
Some manufacturers have observed that the nation’s cement production will soon hit over 28 million tonnes from about 12.5 million tonnes annually as Dangote Cement for example has many ongoing cement projects in the country that are at various stages of completion.
Increasing capacity
Dangote’s Ibese cement plant in Ogun State with six million metric tonnes per annum capacity which is in the final stages of completion and commissioning will commence in August this year.
The managing director of Obajana Cement Plc Jagat Rathee, an arm of Dangote Group, also told Business Day that Dangote Group alone produces over 60 per cent of local production as the firm’s expansion project in Obajana, Kogi, and the construction of Ibese Cement Plant would inject about 17 million tonnes into the market annually. The company has already commenced the construction of some facilities to actualise the export dream, but the poor condition of roads has been the limiting factor for poor sales.
He maintains that the current plant capacity is five million metric tonnes per annum, but by the time the two new lines currently under construction are completed, the capacity will increase from five million to 7.5 million metric tones and target 10 million tonnes in the next 2 years. “We should have been making three trips per day but we are able to make one trip per day, we currently export very little quantity to Niger, Togo and Chad. If there is good road or rail lines connectivity, we should be exporting more to Cameroon and other neighbouring States,” Rathee said.
Benue Cement Company (BCC) another subsidiary of Dangote Group has five new generating plants installed at a total capacity of 52 mega watts to boost production capacity. These projects operators say, would inject millions of tonnes of cement into the market and even begin export in large quantity to other ECOWAS countries.
Thirumoorthy Sukumars, told Business Day that its five new generating plants are installed at a total capacity of 52 mega watts to boost production capacity. The company which locally sources raw materials currently produces 6000 tonnes of bagged cement per day an equivalent of 200 trucks per day.
For Lafarge WAPCO Cement, the company has completed the construction of Ewekoro plant which will be commissioned next month to enable it keep pace with the growth in the Nigerian cement market and maintain its market share.
The company say it is part of strategic plans to boost its production capacity by 2.5 million metric tonnes of cement per annum. The Lakatubu plant is expected on completion to add 2.2 million metric tonnes to the current 2 million metric tonnes capacity from the two plants at Ewekoro and Sagamu in Ogun State.
The Lafarge project is expected to create additional 400 jobs for Nigerians and will continue to create value for the company’s shareholders and stakeholders as soon as it begins operations. “The new cement line at Ewekoro plant, which costs a total of 370 million Euros with a capacity of 2.5 million metric tonnes per annum will be using a dry process production technology and will increase to over 4.5 million metric tonnes per annum that means 12,000tonnes of cement will be produced daily,” says, Samy Abdekalder, managing director and chief executive officer of the company.
The Ewekoro project, according to the firm’s management is expected to make more profits and then the local consumers will also gain affordable cement prices that can sustain the building industry in Nigeria.
Lafarge currently has other cement plants such as Ashaka Cement in Northern part of Nigeria, Unicem in the south, south and Atlas in the Niger Delta to easily reach its distributors.
BUA Group, another indigenous firm and owner of Edo Cement has gone into collaboration with FLSmidth, a Danish company, for the expansion of a cement line in Edo Cement plant in Okpella community of Edo State.
The plant, when completed, will produce 2.5 million tons of cement annually. The executive chairman of BUA Group, Abdulsamad Rabiu, announced at the contract signing ceremony for the building of the plant last week in Abuja that the building of the Edo Cement Plant would be completed in August, 2013.
“The building of the Edo Cement will take 28 months to be completed and it is expected to offer jobs to 4,000 skilled workers and over 20,000 indirect jobs to Nigerians,” Rabiu stated.
It was learnt that the financing of the project is to be provided by FLSmidth and a consortium of banks led by Ecobank, which has since provided an initial $50 million for the take-off of the plant’s construction. Other banks in the consortium are FirstBank, Diamond Bank, Finbank and Bank PHB.
The chairman stated that the total project cost of $500 million includes cement equipment acquisition, infrastructure and a power plant of 100 megawatts.
Self-sufficiency in production
Rabiu however posited that with the coming on stream of so many plants, Nigeria can be talking of self-sufficiency in cement supply in the next three to five years. “Now we import about 6-8 tonnnes of cement to bridge the gap between demand and supply. That is why I said in the next five years, when the companies are in full production, the problem will be over”.
These investments are parts of federal government’s initiative to encourage local production of cement. This initiative has resulted in full-scale production of cement locally as the country before the initiative in 2002 was barely producing about 12.5 million tonnes of cement annually and there was a huge gap in demand. Local demand for cement hovers between 19 and 20 million tonnes annually while local production is about 17 million tonnes.
The president of the Cement Manufacturers Association of Nigeria (CMAN), Joseph Makoju, lauded the management of BUA Group for the investment, saying that the plant would contribute significantly to the quest of the Federal Government to make Nigeria a cement-exporting nation.
He lauded the government for its back-integration policy in the cement sector, saying that the policy would assist in the effort to reduce the high cost of cement and other building materials in the country.
Makoju expressed delight at the involvement of the Danish firm in the plant, recalling that the company had been involved in the building of many thriving cement plants in Nigeria.
Closure of Kaduna Refinery
Some manufacturers have also complained that the closure of Kaduna Refinery in February and March affected companies that use LPFO for production. As a result of this Benue Cement factory was short down for two-week; a situation that contributed to the scarcity of cement products recorded recently across the country.
Before now there had been so much anxiety over a trend of arbitrary increase price of cement in the past three months. President Goodluck Jonathan was so worried that the development would negatively affect growth efforts that he last month gave the manufacturers ultimatum to crash the price. Somehow the riot act worked as the price had come down to N1, 900 in the Lagos area by last week end. While the situation subsisted, the position of the manufacturers was that they do not decide the price of cement, adding that their task is to ensure that there is enough cement in the market.
In rationalising the situation Joseph Makoju, president of Cement Manufacturers Association of Nigeria (CMAN) said: “When there is scarcity in any product there is bound to be an increase in price. Now that there is enough cement in the market, the price will gradually come down.”
But now that the Kaduna Refinery is back in 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 of over 250 trailers of Cement daily.
The manufacturers have estimated that 17 million metric tonnes which would be produced this year would be supplied to the market. A number of new cement plants with combined capacity of 14 million metric tonnes that are currently under construction are all expected to come on stream at different periods of this year and we expect some considerable additional output from the factories.
The manufacturers claimed that their factory price remained unchanged throughout the year at N1,500 in the Lagos area in spite of the rise in the cost of some inputs in the year. Technically, prices effectively came down in 2010 as companies introduced a number of discount and rebate arrangements to encourage their distributors.
Consequently, open market prices also remained stable and in most areas even came down in 2010, averaging N1500 - N1550 per bag in Lagos compared with N1900 - N2000 at the beginning of 2009.
A 50-kg bag of cement currently sells for N1, 900 at the open market in Lagos. That is about 21 per cent drop from N2,500.
Business Day gathered that in the factories, cement sell at N1, 500 but because diesel has gone up from N80 a litre to N160/N170 a litre, transporters have taken this as an opportunity to hike the price. Said one of the manufacturers: “If they charge more than double on a product that you sell at N1, 500; and a transporter is charging N700. That’s quite a lot.”
According to Makoju, we do not expect anything less that 60% 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 price of cement has continued to rise in the country, making it difficult for many Nigerians to become home owners.
Importation to the rescue
Aliko Dangote, who had earlier reacted to government decision to import cement to force down price, said cement importation was not the solution because there were unavoidable costs which come with importation which cannot be controlled.
Speaking on the dynamics of cement pricing, Dangote said his company’s control over the price of cement “is limited as price is directly related to the price of energy”. “If price of diesel goes up by one naira today, transporters will increase their price and this is passed on to the price of cement,” he said.
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