Markets & Finance

Cement sales rise by a fifth on robust property development

CEMENT

Workers off load cement. Construction grew by 18.9 per cent in the second quarter of last year. PHOTO | FILE

Cement consumption grew by nearly a fifth to hit a record five million tonnes last year driven by robust growth in property development.

The consumption is expected to rise further as the government’s infrastructure projects get under way.

Data from the Kenya National Bureau of Statistics (KNBS) shows that uptake of the building material rose by 19 per cent from 4.2 million tonnes in 2013.

Global property consultancy Knight Frank said the uptake is set to rise further on the back of a vibrant real estate sector and planned mega infrastructure projects.

“The real estate sector is witnessing a boom with no signs of abating,” said Knight Frank (Kenya) managing director Ben Woodhams.

“This, coupled with government projects such as the standard gauge railway and Lapsset (Lamu Port South Sudan and Ethiopia Transport corridor) will continue pushing up demand,” he added.

Kenya’s real estate sector has over the years become popular among investors as a money-spinner due to princey returns.

The KNBS data shows that consumption has grown 61.2 per cent from 3.1 million tonnes in 2010 to five million tonnes in 2014. This looks set to increase the share of the construction sector to the country’s gross domestic product.

READ: Building boom to spur cement firms’ share rally at NSE

Construction grew by 18.9 per cent in the second quarter of last year, the fastest pace among the economy’s sectors, statistics show.

Multiple firms have entered into the sector eyeing a piece of the market amid growing demand for residential units, commercial office blocks and shopping malls.

For instance, Centum is constructing East Africa’s largest shopping mall on 100-acres in Nairobi’s prime Runda estate, while  the Sh22.7 billion Garden City Mall on Thika Road is nearing completion.

Cement firms recently cut the ex-factory price of the commodity to Sh575 per 50kg bag, from over Sh600, citing falling energy prices in what could further ratchet up demand.

The rising demand for cement has also been fuelled by saccos which are building housing units for their members.

These include Stima Sacco, which is building 1,500 houses at a cost of Sh4 billion, while Mwalimu National Sacco is constructing homes worth Sh2.9 billion.

Firms have been producing more cement that the market can absorb with statistics showing that production stood at 5.7 million tonnes last year, up from 5.05 million tonnes the previous year.

Standard Investment Bank, in its latest report on the sector, says production will rise to 6.3 million tonnes this year and 6.7 million tonnes next year.

There are six cement makers in Kenya namely BamburiAthi River MiningEast Africa Portland Cement, Savannah Cement, National Cement and Mombasa Cement.

Two other potential entrants are Sanghi and Dangote Cement, with Dangote seen as a big threat to local players.