By Franklin Alli
The cement sector of the economy, weekend, closed the year with huge inventory of unsold cement and clinker with the two biggest manufacturers, Dangote Cement PLC and Lafarge WAPCO Cement Nigeria Plc recording 1.47 million tons of unsold stock.
Figures obtained from the two manufacturers show that Dangote had unsold stock of 950,000 tons while Lafarge had 520,000 tons. “It is unfortunate that the industry is experiencing such glut so soon in the investment circle when the manufacturers are yet to recoup significant part of their money”, said Engr. Lanre Opakunle, Plant Manager, Lafarge Ewekoro II.
He called on the Federal Government to take urgent step to protect the local manufacturers by not allowing imported bulk cement to come into the country again through the seaports and borders, otherwise, the economy will soon be grappling with the multiplier effects in terms of job loss and decline in all other economic activities that are connected to the cement industry.
“Within the last few months the market is having more capacity than demand. At Lafarge, the situation is so bad. We are having unsold of 300,000 tons of cement and 220,000 tons of clinker in our silos across our three plants (Sagamu, Ewekoro I and Ewekoro II. Before these pileups, we used to load ten trucks per day but now that there are no sales and loaded trucks have nowhere to go; as a result we are losing 800 tons per day.
By the time we have filled up our strategic storage silos with clinkers we have no option than to shut down production. We are planning for export as a nation and allowing importation, it is a paradox,” he said.
He said that importation of cement has been very attractive because it comes with paltry duty of 20 percent and levy of 15 percent and clinker at 10 percent, a development which he noted, has made the landing cost of imported cement to be very cheap with a bag going as low as $35 /T/FOB.
Commenting on why the prices of cement is still high despite the glut, he said that manufacturers have been grappling with the rising cost of input occasioned by energy cost which accounts for 31 percent of production cost in Nigeria compared to less than 10 percent in China.
“In Nigeria, the price of low pour fuel oil, LPFO, has jumped up from N 25 per liter in 2009 to N107.76 per liter as at November 2012, an increase of 331 percent.
Haulage is another factor that is out of control of the manufacturers. Haulage cost alone accounts for 20 to 25 percent of the open market price of cement. All bulk products are affected by this factor due to deplorable state of the roads.
“Despite this advantage, local cement manufacturers have kept their ex-factory prices constant at an average cost of N1, 450 per bag since 2009 while input costs continue to rise. The manufacturers have been absorbing considerable cost which put differently is a form of consistent reduction in the ex-factory price of cement, by keeping the price stable in spite of the rising cost of production,” he said.
As at 2002, the local cement industry was in a comatose with total local production at 3.0 million metric tons. Consequently, in 2009, the late President Umaru Musa Yar’dua lifted the ban on importation of bulk cement in 2009, and granted import licenses to six new firms along the existing cement producers to flood the market with the commodity and crash the price.
The six new companies that got the import licenses to complement existing ones were: Minaj Holdings Limited, Enugu, Madewell products, Sapele, BUA International Limited, Kano; NICA Limited, Maiduguri; Reagan Renaissance Limited, Calabar and MAAN Labadi, Lagos. They joined the seven existing players: Lafarge Cement WAPCO Nigeria PLC; Ashaka Cement; Dangote Cement PLC (comprising Benue Cement Company, Gboko; Obajana Cement, Kogi); UNICEM Calabar; Cement Company of Northern Nigeria, Sokoto and DURECHEM, Ogun State
This was however complemented with the backward integration policy of government, which encouraged local manufacturers, and prompted local production to rise to 18.5 million metric tons as at 2012 with another 12 million metric tons expected from the expansionexisting plants and new plants currently under construction across the country. Among other things the increased production is based on the expectation that government would have affected the ban on imported cement five months ago, specifically August 2012.
“Government should enforce the ban on cement import,” said Mr. Daljeet Ghai, Group Chief Executive, Dangote Cement. “Dangote alone has the capacity needed to meet local demand and sustain supply of the commodity across the nation”, he said.
Citing the example of the company’s Ibese cement plant as basis for confidence in the ability of local manufacturers to meet domestic demand and still be able to export, Ghai said: “Ibese plant is grinding 480,000 tonnes per month, while daily production is 16,000 metric tonnes at 2,400 metric tonnes per hour.
“The Ibese plant, started with a daily production of 12,000 metric tonnes in February, but barely two months after, production moved up to 16,000mmt, which is it’s full installed capacity, and this would lead to the achievement of the yearly target of six million metric tonnes of cement.”
Vijay Khana, Deputy Director, Operations, Ibese Cement plant added that on a daily basis, the company supplies the market with more than 200,000 bags of cement from the plant. “ We load 250 trucks daily; a private truck can carry 600 bags, each Dangote truck carries 800 bags; while smaller trucks carry 300 bags.”
Similarly, earlier, Bruno Lafont ,Group Chairman/CEO, Lafarge, also affirmed that with the new plant commissioned by the company, the country is now self sufficient in cement.
Engr. Joseph Makoju, Chairman, Cement Manufacturers Association of Nigeria (CMAN), said the Federal Government’s backward integration policy in cement production, has spurred installed local cement production capacity to rise exponentially from 3.0 million metric tons per annum in 2002 to 18.5 million metric tons per annum.” This, he said, has moved the country from the position of the world’s leading importer of cement in 2006 to a position of not only self sufficiency today but indeed potential net exporter of the product.
Alhaji Aliko Dangote, President of the Dangote Group, noted: “With this achievement, the era of cement importation into the country is over as we now have capacity to surpass local demand. In 2011, the total national demand for cement was 17.0 mmtpa. The current combined capacity of Dangote Cement plants alone is over 20 mmtpa and total installed local production capacity now stands at 28.0 mmtpa.
“In fact, we are currently engaged in converting our import terminals to export terminals in readiness to export our excess capacity in cement to neighbouring West African countries, where there is a cement deficit. I am delighted that Nigeria is today transforming from being one of the biggest importers of cement in the world into an exporting nation, within a short while,” he said.