Top cement companies face excess capacity risk

Excess capacity in cement production in Kenya is likely to occur with the planned expansion of production by four major manufacturers, says a new report by local brokerage firm AIB Capital.

Production is expected to increase to 18.1 million metric tonnes from the current 13.1 million. Local consumption however remains at 45 per cent of the current production while distribution to Uganda and Tanzania is falling, showing that new expansion will lead to overcapacity.

“Presently, four of the major cement manufacturers are planning to expand and double their capacities from 2019.

“ … the consumption level being low at six million metric tonnes accounting for only 45 per cent of the total capacity and cement distribution to Uganda and Tanzania declining, overcapacity of cement is unavoidable,” says the report.