Cement prices set for further drop as capacity doubles

Kenya has doubled its cement production capacity, helped along by new capital investments that are likely to depress prices for the commodity even further.

Annual production is now estimated at 12 million tonnes, according to industry leaders, including the capacities of new plants and enhanced yields from existing ones.

But a sluggish economy has seen the construction sector stall significantly, even reporting dips in some pockets of the market, with annual demand ranging between 5 million and six million tonnes.

Enticed by the industry’s huge profitability in earlier years and booming construction industry, investors have pumped in billions of shillings for a share of the pie.

Bamburi Cement has unveiled an Sh3.5 billion grinding plant at its Athi River facility among other capacity enhancements, said managing director Hassani Seddiq.

Cement prices are below levels recorded more than a decade ago, yet power prices have either climbed or remained flat.

“If we continue with this trend, then I think the industry is not sustainable anymore. Prices are falling while costs are rising,” Mr Seddiq said.

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Bamburi’s decision on additional investment was informed by the need to protect its market share, which has been eroded by newer entrants, thanks to their higher plant efficiencies.

Seddiq said the focus is now on cutting costs, with plans to haul bulky inputs, including clinker, from the Coast through the largely underutilised old railway line. He estimates this could help slash transport costs by up to 30 per cent.

Bamburi’s share of the market has shrunk to about 32 per cent from a high of 60 per cent when its only competitor was East African Portland Cement Company.

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Hassani SeddiqBamburiCement prices