Construction at the National Cement plant in the outskirts of Nairobi. The firm is expected to open the Sh11.9 billion plant next year increasing its capacity to two million tonnes. Correspondent
What you need to know:
The additional cement capacity has kept wholesale cement prices stagnant over the past two years at about Sh700 despite input costs like clinker, coal and fuel having risen by double digits. This has slowed down the profitability of cement firms like Bamburi and EAPCC.
A November report by Old Mutual Securities indicates that the new investments will widen the overcapacity in Kenya’s cement market deepening the on-going price war.
National Cement says it will open a Sh11.9 billion plant next year in what is expected to unsettle dominant players while keeping cement prices stagnant.
The company on Tuesday said the new plant will have an annual capacity of 1.65 million tonnes, pushing its total capacity to two million given existing volume of 350,000 tonnes from the plant it opened in 2010.
National Cement, makers of Simba brand, says it received an undisclosed loan from KCB Group, raw materials on credit and cash injection from its parent company Devki Group Of Companies to finance the new plant.
The new capacity is set to intensify the battle for control of the regional cement market that became intense with the entry of National Cement and Mombasa Cement.
Mombasa Cement, which owns the Nyumba brand, has swiftly claimed about 20 per cent of the local cement market largely owing to its pricing strategy.
“The new plant will significantly assist us achieve our goal of securing a much higher market share,” said Mr Narendra Raval, the managing director of Devki Group of Companies.
The new investments will turn National Cement to the second largest cement market based on production capacity. Currently, Bamburi Cement has an installed annual capacity of 2.3 million tonnes, East Africa Portland Cement Company (EAPCC) — 1.4 million tonnes, and Athi River Mining has more than one million tonnes.
But these companies are mulling expansion plans to grow and defend their market shares in what is expected to benefit consumers in the form of cheap cement.
The additional cement capacity has kept wholesale cement prices stagnant over the past two years at about Sh700 despite input costs like clinker, coal and fuel having risen by double digits. This has slowed down the profitability of cement firms like Bamburi and EAPCC.
A November report by Old Mutual Securities indicates that the new investments will widen the overcapacity in Kenya’s cement market deepening the on-going price war.
Total installed cement capacity is set to increase 31.5 per cent to 10 million tonnes per year by 2015 from current 7.6 tonnes. [email protected]
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