UGANDA: Tororo cement in sh86b expansion

Tororo Cement Limited, Uganda’s largest cement manufacturer has injected $ 25m (about sh86b) towards the plant expansion.

Brij Mohan Gragrani, the company executive director, said the new plant is expected to increase cement production from the current 1.8 million metric tons to 3 million metric tons per annum to meet the increasing demand of cement in the region. 

Gagrani said they expect to scale up production capacity that will include construction of more cement grinding mill with the cement storage silos, rotary packers, clinker feeding system and clinker sheds for investments of $25-30 Million. 

‘’The expansion is proposed in view of market demand in Uganda and the neighbouring countries,” he said.

UGANDA: Hima Starts Bulk Cement Business Line

Hima Cement has said it has strategically positioned itself to meet demands arising from the construction boom in Uganda with the launch of their Bulk Cement business line.

Bulky Cement business is a new delivery service that offers contractors a more efficient mode of receiving cement at their construction sites. This reduces logistics costs associated with handling bagged cement.

It involves having trucks that carry cement in large quantities direct to construction sites. Each truck has a capacity to transport 28 to 32 tons of cement.

This means a cleaner environment and faster completion of projects as less time is spent loading, unloading and emptying the cement from bags. This will also save contractors from pilfering and tearing losses.

"This mode of delivering cement is the standard practice in developed countries. Uganda is on a rapid growth path and as a key player we are ready to meet the demands in this market. We are evolving from being a producer of cement only, to a partner for solutions," said Daniel Pettersson, Hima Cement Country CEO during the bulk cement launch at Kyadondo Rugby Grounds.

The introduction of the service comes as the country sees a rise in the number of big infrastructure projects boosted by high levels of public and private investments.

Investments in transportation infrastructure, power plants and utilities, commercial construction and property development are expected to rise further in the forthcoming years prior to first commercial oil production.

Pettersson said demand for Cement in the country is projected to grow at a faster rate of 13% outpacing GDP 7% and electricity demand at 10%.

"In 2010, Hima Cement made a significant investment to increase production capacity to 900, 000 tons a year. The new bulk cement service will now make the delivery system more efficient for our customers," he added.

In this year's budget the government allocated Sh2.6 trillion to the roads and construction sector calling for improved service delivery by all suppliers.

The country remains committed infrastructure development and industrialization and there is a lot of progress as the country's oil reserves elicits private interest in the market.

UGANDA: Cement Market Jitters

In Uganda, a construction customer buys cement at about $124 per tonne. That is higher than the average global price for gray cement - which hovered between $76 - $77 per tonne in 2013 - and higher than the $100 average in Sub-Saharan Africa. In fact, Kenyans and Tanzanians buy cement more cheaply than Ugandans who buy a 50-Kg bag of cement at an average price of about Shs 28,000 in local retail shops around the country - quite high for a product whose main raw material - lime stone - is abundant locally. That explains why the per capita cement consumption of cement in Uganda stands at a miserable 35 kg way below the global average of 500 kg.

Cement producers in Uganda say it is inevitable that Ugandan cement should be expensive. Alok Kala, the Tororo Cement general manager, says Ugandan cement is comparatively more expensive because of a couple of factors. He says Ugandan cement is charged Excise duty tax, which for instance the Kenyan cement producers don't pay, and Ugandan power tariffs are also higher than the Kenyan tariffs. Also, Uganda imports clinker, a major raw material, from Kenya, and coupled with infrastructure bottlenecks, the high cost of business must translate into more expensive products.

Part of the problem has been attributed to the high demand, which outstripped supply several years ago - thanks to the booming construction and real estate sector and the lucrative markets in South Sudan and DR Congo. Uganda has two main cement manufacturers - Hima Cement - owned by Lafarge Group - and Tororo Cement - both of which have a combined capacity to produce 3.6 million tonnes - way below the rising Ugandan market demand. Consequently, Uganda does import a substantial amount of cement from countries such as Kenya, Egypt and Pakistan among others.

Two new companies; the Kuwait-based DAO Group, and China National Machinery Import & Export Corporation , are investing in new cement manufacturing plants worth $400 million with a combined production capacity of 1.6-million tons a year. The two new factories are being set up in Budaka District in eastern Uganda, and in Karamoja in the north-east. Those could offer a respite in the medium-long term but not in the short term when the demand is expected to spike thanks to the several large scale projects including dams, highways, bridges and buildings that are expected to kick off in the next few months. That means cement prices are expected to rise even higher in the short-term.

UGANDA: Turkish Firm Eyes Uganda Cement

Kolin Construction, a Turkish-owned tourism and trading company has expressed interest in Uganda's cement manufacturing industry after noticing an abundance of raw materials.

The company Chairman Naci Kologlu who met President Yoweri Museveni last week, said they have successfully worked on construction of the Hoima- Tonya road in Bunyoro Sub-Region in Western Uganda. This is one of the many projects they are handling in Uganda.

"There are many opportunities and we think the cement industry is still not so crowded," Kologlu said.

President Museveni asked them to tap into the abundant opportunities that Uganda has in value addition of agro-products and minerals.

He specifically urged them to work out projects in relation to value addition to the maize crop that Uganda produces, leather and minerals such as cement and iron ore. He also concurred with the proposal to build hotels to cater for the budding tourism industry.

"The government is ready to help you build a hotel in Kampala and we shall facilitate you to establish a cement factory in the country," said Museveni.

The president also met Sseko Designs Shoe Industry, based in the United States of America, who manufacture and export ladies shoes to the United States of America. The company is based in Kyebando a Kampala suburb.

According to Ashley Paulus, the company's Operations and Programmes Manger they currently produce 8,000 units per month valued at $300,000.

The company, she added, employs a work-force of women only with particular emphasis on those that are disadvantaged socially and physically such as people living with HIV/AIDS and widows among others.

AFRICA: UGANDA: Cement Prices Drop,Buyers Jubilate

Increased local capacity in cement production is driving down cement prices in Uganda and available statistics show that prices have fallen by about 18 percent since 2009. 

Recent dealer price trends in Kampala show that the price of cement fell from a high of 27, 090 shillings in August last year to 22, 200 shillings in October this year. 

The East Africa Cement Producers Association chairman, David Njoroge attributes the price drop to increased local capacity as a result of investment in the industry which includes the new 200 billion shillings Hima Cement factory in Kasese and the 1 billion Tororo Cement project announced recently. 

Njoroge says the only way to manage prices of cement downwards is to encourage local production and increased local competition. 

He also called on government could also review the excise duty on cement so as to make the product even more affordable.

AFRICA: UGANDA:

cement prices have dropped by 18% in the past one year. The East Africancement Producers Association (EACPA) attributes the decline to an increase in local cement production. 

Recent dealer price trends in Kampala show that the price of cement fell from sh27,090 for a 50kg bag in August last year, to sh22,200 in October this year. The price includes 18% value-added tax and the sh500 per bag excise duty. 

The earlier high prices of cement were largely attributed to huge demand and inconsistent supply coupled with huge production costs, especially for electricity, heavy fuel and transport. 

According to David Njoroge, the EACPA chairperson, the steady fall in priceswas due to the heavy investment by local cement firms over the period to boost production. 

“Last July, for example, Hima cement established a $120m factory in Kasese, increasing production capacity from 350,000 tonnes to 850,000. Tororo cementis also undertaking a $50m investment project to enhance production. Its completion will optimistically force prices downwards.” 

Njoroge warned that cement prices would increase if there are no efforts to support local production or promote local competition. 

Apart from boosting the local construction sector, increased investments in the local cement industry will have a hand in reducing the country’s unemployment rates. 

However, amidst the excitement created by the slumping prices, manufacturers are concerned about the cheap cement imports from Asia where production is subsidised. 

Njoroge revealed that the comparative production costs in Asia and the Middle East were much lower than in Uganda.The cost of transport in Uganda is between 12 and 15 US cents per kilometre per tonne compared to 3 US cents in China and much of Asia. 

Electricity costs $90 per megawatt per hour (MW/h) in Uganda compared to $30 per MW/h in much of Asia. It is even lower in the Middle East, according to Njoroge. 

“This is a serious stumbling block as we try to compete with products from these regions that have, in addition, enjoyed a wide range of export incentives since the global economic crisis begun,” says the chairperson. 

Faced with a similar situation, Nigeria recently imposed a 35% tax on importedcement in the spirit of safeguarding the local industry from undue competition and accelerating the growth of local capacities as well as provide possibilities for eventual export of cement to other African states and beyond. 

Local manufacturers say it is about time that similar measures are taken in Uganda and East Africa to enable a level playing ground and to safeguard the local industry which recently faced collapse due to influx of cheap cement from Pakistan, Turkey and China . 

In 2008 EAC governments reduced the Common External Tariff (CET) oncement from 40% to 25% citing production gaps brought about by unforeseen factory breakdowns for some local producers. 

Today, local manufacturers under the auspices of EACPA confirm that at 10 million tons, their capacity now exceeds demand in the region by 3 million tons and the EAC governments need now to move to guard the local industry from competing with subsidised imports. 

Recently the manufacturers petitioned government to reinstate the CET at 35 percent or $50 per ton, whichever is higher, in order to level the playing field and protect the region from negative effects of dumping. 

They argued that Uganda would lose sh131bn and a further sh80b to sh100b in tax revenue if the industry collapsed.

UGANDA: High cement prices hurt construction

The construction industry is feeling the strain of a recent price rise in the cost of building materials, which some fear could have negative effects on the country’s fastest growing sector.

The Uganda Bureau of Statistics (UBOS) reports that cement prices went up by 11.2% between July and August this year, following on the trend set by steel bars and paint, whose costs also rose by 3% and 1% respectively.

Consequently the same UBOS report indicated that the price rise caused an increase in construction costs. Non-residential buildings such as shopping arcades and office buildings were the most affected, registering a 0.9% increase in cost.

The cost of putting up a residential building also saw a 0.5% rise. Supplies of materials also saw a dip with cement alone dropping by 8% in August, compared with a 22% increase the month before.

UBOS attributes the dip to decreased imports of cement, due to the appreciation of the dollar against the shilling. The dollar is now trading at Shs 2,251.

Experts fear that the increase in the cost of construction materials could have a ripple effect as this has been the fastest growing sector in the economy, with growth rates of over 13% per annum, over the last two years alone.

The Managing Director of Sadolin Paints Chris Nugent said that the recent increase in prices is bound to affect other areas of construction.

“We know for a fact that this will affect investments in other areas of construction,” he said. However, he maintained that plans to build a $5million (Shs11billion) factory in Namanve were still on track, as it was planned to increase production by 50%.

One of those directly affected by the recent price increase is Ronald Ssegawa of Rona Estates in Ntinda, who says the increase in prices is pinching deeper into his pockets.

“The final cost of cement, which is now at Shs 24,000 a bag, if you are buying in bulk, has affected our output. It was at Shs 21,000 per bag when we started early this year so the cumulative cost is digging into our margins,” he said.

Ssegawa also warns that the increase has serious consequences on those who borrow money to build homes or who operate within small budgets. “If you are unfortunate enough to stall midway, you could find your costs have doubled by the time you resume construction,” he said.

For their part, cement manufacturers, Tororo Cement, admitted in July when the statistics were collected that their prices had gone up as a result of high operating costs.

However, Tororo Cement Marketing Manager K. Banargi said they were planning to announce lower prices in the next two weeks. “We are going to reduce our prices even further due to the increasing competition in the market. We want to be the most affordable product in the market,” he said.

UGANDA: Cement makers call for tough tax

Uganda cement makers have urged the five East African Community states to increase the common external tariff on imported cement. They said the country’s present cement output meets local demand. 

The manufacturers said the importation of cement, mainly from Asia and Egypt, was no longer necessary as industry players have invested sh2.2 trillion in the past year to produce the required cement and shoulder local demand. 

This development comes on the heels of news that Tororo Cement’s new factory would be completed soon. 

“We will complete the plant by March, 2011. It will have an estimated outflow of $20m (about sh44b). This would double the cement grinding capacity from one million to two million tonnes annually,” the company executive director, BM. Gagrani, said in an interview on Monday. 

Gagrani said the project would have a new cement grinding mill and two storage silos of 10,000 tones and a packing plant. 

When the new plant’s machines finally roar, the local cement industry manufacturing capacity will jump to close to three million tonnes a year, after Hima Cement opened its new factory that will raise production to 850,000 tonnes annually. 

Gagrani said the plant’s kiln rehabilitation was also in progress and that the new investment of $30m (about sh66b) would increase clinker consumption to 1,000 tonnes per day, a 150% increase from the current 400 tonnes. He added that the firm was also undertaking measures to curb pollution. 

“We have undertaken complete rehabilitation of our existing pollution control equipment,” he said. 

“Although the equipment installations are not very old, productivity and effectiveness has reduced due to load-shedding and power fluctuations.” 

The increase in local cement supply, analysts say, will be critical in determining the product’s end price. 

Low cement production by local firms has always been blamed for the increase in the infiltration of cheap cement from mainly Asia and Egypt. 

Cement manufacturers in Asia and Egypt enjoy low input costs, and export their surplus products mainly to Africa. 

But the intense investment by local firms signifies imports may shrink since the local companies will have adequate capacity to meet demand. 

“The cement industry in Uganda has bright future and can compete favourably with others in East Africa.”

Uganda: HIMA Cement Commissions New Factory

Kampala — HIMA Cement last week opened its new plant set to raise annual production and supply of cement by an additional 500,000 tonnes.

The opening of the plant now increases Hima Cement's annual production capacity to 850,000 tonnes from the previous 350,000.

"I believe the new investment will go along way in increasing the supply of cement in the local market, meaning Uganda will cease to be a net importer of cement," Hillary Onek, the energy minister, said in a sptatement.

Peter Lokeris, the minerals state minister, represented Onek during the launch at the Kampala Serena Hotel last week. "I expect this position will save our economy in excess of sh100b annually, which otherwise would have been lost in foreign exchange," Lokeris said.

Demand for cement, a key economic indicator, is expected to remain highthroughout this year as a result of infrastructure projects and home building currently underway in the country, industry players say.

In 2008, due to supply shortages accruing from run-away demand from the construction industry, Uganda and four other East Africa Community partner states lowered the common external tariff for cement from 40% to 25% to permit importation of cheap cement from China and Pakistan.

This apparently increased the state's foreign exchange outflow through hiked import expenditure. "We want to assure the market of high quality products manufactured under friendly environmental conditions, which observe global standards in emissions," Hussein Minsi, the chairman of Hima Cement, said. He added that many jobs would be created.

Martin Aliker, a director at the firm, said the opening of EAC borders would enable the firm harness more opportunities.