Fears Over Cement Price

By Michael Mukwuzi

The decision is raising as much dust as cement itself gathers. Though well intended, the proposal by the Federal Government to allow mass importation of branded 50kg bagged cement has set the fragile industry on edge once again. Under the arrangement, some companies which include Minaj, BUA, Lababibi & Regan and Madewell would be given permit to import about six million metric tons of cement in branded 50kg bags.

The importation aims at once again intervening in the soaring price of cement, which, by last week, had hit an average of N1,800 for a 50kg bag of cement. Since the price went over N1000 two years ago, it has hung there and actually threatened to surpass the N2000 mark last year before the Federal Government hurriedly gave some companies the nod to import cement, so demand could be confronted and prices forced down. The panic measure succeeded in the interim, as prices dropped from an average of N1900 that it closed the year with to N1350 some five months ago. But the price monster would not be kept down, as it surged back to the old (circa-N2000) high within a month.

In the last 10 years, increased construction activities, buoyed by a stable polity and consequent economic push, have impacted on cement consumption. From an initial figure of 8.1 million metric tonnes in 2001, consumption grew to more than 11 million metric tonnes in 2006. Over the last two years, the average rate of consumption growth has been as high as 17.5 per cent, with price moving from N625 in 2002 to N1,250 in 2007. Cement price in Nigeria is four times the price in Egypt and South Africa and 10 times the price in the United States. Imports account for 70-80 per cent of consumption. The major importers are Dangote Group, 34 per cent and Flour Mills Nigeria, 24 per cent while the quartet of Eastern Bulk Cement, Bonny Allied Industries, Atlas Cement and Ibeto make up the rest. The major local producers are Dangote Group, Larfage/ WAPCO, Ashaka Cement and Cement Company of Northern Nigeria. Indications are that Dangote Group is set to overtake Larfage\WAPCO and Ashaka which together hitherto controlled 75 per cent of the local market share. So severe has the cement shortfall become that large scale users are now compelled to book for supply months in advance from local producers to stand any chance of delivery. Last year, government, in its efforts to address the shortfall in demand and thereby force down prices, drew up a list of firms that have verifiable investment in local cement production. Towards this end, 13 plant owners and some other end users in the construction industry were granted licences to import the product. The benefiting companies include big players like Dangote, Lafarge, Flour Mills, Ibeto, Eastern Bulkcem and some new investors in cement production like Quacem, Westcom, Purechem and Topcem. The approval grossed about 12 million metric tons. With prices still high, government is considering issuing another round of licences for cement import. But industry experts are calling for caution, saying benign as the palliative measure may seem, it could turn out an ill wind against local cement producers if overused. In the last couple of years, there has been a flurry of investment in local production. Last year government accepted the industry argument that importation of bagged cement would have negative consequences if imports flood the markets, squeeze prices and eliminate the prospect of any returns on the huge local investments being made. Hedged in between the devil of scarcity plus high prices and the deep blue sea of protection of the local cement industry, government decided to apply the brakes on imports after the first phase of licence approval.