Cement businesses raise output expanding market

Cement businesses raise output expanding market

On April 5, the cement manufacturing company announced plans to raise its output to 46.3 million metric tons by 2015 as it’s cone crusher expands across Africa.
Output in Nigeria will account for 32 million tons of that 2015 projection from 20 million tons this year.
With more investments by the sector players combined, local production has risen to about 27 million metric tons per annum, with the national demand estimated at between 17 and 18 million metric tons per annum.
Examining the relationship between GFCF and the SR value of local cement consumption from 2006-2011, it can be estimated that, on average, the Saudi riyal value of local cement consumption accounts for an estimated 6.7 percent share of GFCF.

According to market insights, the cost of cement accounts for a range of 3 percent-7 percent of the awarded contract value. It is important to note that GFCF is not accounting for the total value of contracts awarded, thus the two values are not equivalent.

The company said at the weekend it was widening the distribution outlets by opening more mega depots and signing on new distributors so that the consumers could reap the full benefits of the increased local production.

Dangote Cement, which accounts for over 70 per cent of the cement produced in Nigeria, has continued to invest more in its production capacity by expanding its production lines and establishing new plants.
A key challenge to the sector is the ongoing export ban, which will serve to constrain growth for Saudi cement producers. In the almost four years since its introduction, neighboring and regional countries have developed their cement markets, becoming substitutes to the Saudi production. This will make it difficult for local producers to retain their high levels of exports should the export ban be removed. In addition, fuel shortages reported by some cement companies in recent months is another important challenge that the sector faces.

Dangote Cement recently opened a new $1 billion plant and has entrenched itself as lead supplier of cement in West Africa. This, the company claims, will ensure the nation produces enough for home consumption and have surplus for export to other countries.

According to market insights, it is new fuel allocation that is causing the delay, which is affecting the start of new production lines and output. Consequently, this will put upward pressure on cement price, due to the increased reliance on cement mill inventory, which lowers stockpile levels, and results in a non-optimal utilization of resources. The management of Dangote Cement believes that only a liberalised distribution system can make increased local production translate to cheaper cement and make meaningful the huge investments in local production.