An employee of Athi River Mining company, the makers of Rhino Cement, at the company’s plant in Athi River. PHOTO | FILE
What you need to know:
A 50-kg bag is retailing at an average of Sh650, with the ex-factory price having gone as low as Sh575 a bag this year.
Intense producer rivalry continues to shield cement consumers in Kenya from higher prices even as inflationary pressure and a weak shilling push up commodity prices.
Cement dealers in Nairobi, Nakuru and Nyeri are pricing a 50-kg bag from different producers at an average of Sh650, with the ex-factory price having gone as low as Sh575 a bag this year.
At the beginning of the year, the average price was about Sh680 per 50-kg bag, and after coming down in the first quarter the average prices have held steady.
A year ago the average price was about Sh700 per bag, having fallen progressively from about Sh750 in 2009 due to increased price competition among the producers in Kenya.
The shilling has depreciated by 16 per cent to the dollar, while monthly inflation has averaged 6.36 per cent for the first eight months of the year, meaning that the producers have had to absorb the increased cost of materials which would ordinarily have been passed on to the consumers.
“We have not seen prices being increased due to the devaluation (depreciation). The prices are stable,” said Athi River Mining (ARM) chief executive Pradeep Paunrana.
Manufacturers import clinker for their plants, although some like ARM, Bamburi and Mombasa Cement have cut down on the external sourcing by producing locally most of the requirement.
Savannah and National Cement are setting up own clinker plants in Kajiado. Last year, Bamburi, which is the largest local cement producer, imported clinker worth Sh2.1 billion.
“The Kenya and Uganda markets remain in a clinker manufacturing deficit and cement surplus in the short run; however the group’s markets extend to larger Eastern and Inland Africa markets which are in a cement-deficit position,” said Bamburi in their annual report for 2014.
Data from the Kenya National Bureau of Statistics (KNBS) for the first six months of the year shows that cement production and consumption rose at a same rate of 9.7 per cent compared to the same period in 2014.
KNBS shows that production stood at 3.04 million metric tonnes against consumption of 2.72 million metric tonnes in the six months to June 2015, compared to production of 2.77 million metric tonnes and consumption of 2.48 million metric tonnes by June 2014.
Cement firms in Kenya have therefore been producing above the market’s absorption capacity, meaning supply to projects in the region such as the Standard Gauge Railway, Amu power and Lamu Port South Sudan-Ethiopia Transport corridor are key in helping bridge the gap.
The contractor of the Sh327 billion Mombasa-Nairobi railway, China Road and Bridge Corporation (CRBC), said it had bought more than 150,000 tonnes of local cement by June.
CRBC said it was supplied by four manufacturers — Bamburi, EAPC, ARM and Savannah — with Bamburi the top supplier at 100,000 tonnes. The excess capacity is also absorbed by regional exports.
The installed capacity of the cement firms in Kenya is around nine million metric tonnes, meaning that they are in line to retain idle capacity for years even if they match the half-one 2015 rate of production during the second half.
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