Displaying items by tag: CMAN

Nigeria's Minister of Trade and Investment, Olusegun Aganga brought together warring parties from Dangote and Ibeto Cement this week to discuss their very public spat about the state of the country's cement industry.

Claims that Nigeria is facing a 'glut' of cement have been building since the Cement Manufacturing Association of Nigeria (CMAN) declared that Nigeria was 'self-sufficient' in cement in late 2012. So when leading cement importer Ibeto Cement questioned this narrative, leading cement producers Dangote and Lafarge hit back. Aganga then announced a review of the country's industry.

Despite Nigeria's potential to consume cement, something is stopping it. Yet, as Ibeto Cement rightly asked, if Nigeria is producing too much cement why isn't the price falling?

Hard facts about the Nigerian cement industry are elusive. This is what we know. Nigeria's population is apparently 170m. Its cement industry has the capacity to produce 28Mt/yr (Global Cement Directory 2013). Its production level was 18.5Mt/yr in 2012 according to CMAN. However figures compiled by the United States Geological Survey placed production much lower at 11.6Mt in 2011. Consumption is believed to be 17-20Mt/yr. In 2011 it was 17Mt. Ibete Cement, the sole importer into the country, is allowed to import up to 1.5Mt/yr.

Nigeria's main producers include Dangote (19Mt/yr capacity, 70% of the market), Lafarge WAPCO (4.6Mt/yr, 17%), Unicem (2.5Mt/yr, 9%) and Ashaka Cement (2Mt/yr, 7%).

Hype about Nigeria's potential as a cement-producing nation hinges upon its low per capita consumption (110kg) compared to some of its African neighbours and indicators of expected growth such as a housing deficit of 16 million homes.

CMAN boss Joseph Makoju addressed this head-on, blaming the high cost of haulage and energy. He said that the energy cost accounts for over 35% of the production cost and that the price of low pour fuel oil (LPFO) had risen by over 300% from US$0.16/l in 2009 to US$0.69/l in November 2012. It should be pointed out that Makoju is also the special adviser to the president of Dangote Group, Aliko Dangote. Unsurprisingly he has advised the Federal Government to impose higher taxes on imported cement to discourage imports.

The production boom of recent years has been threatened by a weakening increase in demand. The gap between production and lower consumption estimates is around 1.5Mt. Dangote and Lafarge WAPCO's combined unsold stock at the end of 2012 was also just below 1.5Mt. Both figures are suspiciously close to the amount Ibeto is allowed to import annually. As usual, the easiest target is the cement importer. Dangote's political clout as a key Nigerian company, large-scale employer and all round African success-story will doubtless help its argument.

Yet if imports are really more competitive than Nigeria's domestic product how can the country possibly hope to export cement? Also this week Liberia announced it has relaxed its tariffs on cement. As luck would have it Dangote is building a new cement plant in the country. Sounds ideal for tricky import negotiations.

"We believe that Nigeria has arrived as a cement manufacturing country," said Joseph Makoju, Chairman of the Cement Manufacturing Association of Nigeria (CMAN), to mark yet another 'moment' when Nigeria's ability to produce cement has overtaken its demand.

One of Makoju's reasons for Nigeria's 'arrival' was the fact that the Nigerian government hasn't issued any import licenses since the start of 2012.

As Global Cement Weekly #46 noted in April 2012 this is strange given that domestic consumption is up to 18Mt/yr: a figure 4Mt below modest estimates of national capacity which start at 22Mt/yr. According to Global Cement monthly price reviews the cost per bag has risen by 20% since 2010 despite presidential orders to keep it down. However much cement Nigeria seems to produce the price still keeps on rising.

The prices aren't the only figures that are rising year-on-year. Dangote, Nigeria's leading-producer, reported an increase in operating profit of 14% to US$745m in 2011 from US$654m in 2010. Lafarge WAPCO, the country's second largest producer, reported an increased operating profit of 41.7% to US$74.1m from US$52.3m.

Prices continue to rise but this could be due to cartel-like behaviour. President Goodluck Jonathan seemed to suggest as much in 2011 when he ordered prices down. Then again Nigeria's poor transport infrastructure and distribution chains could be to blame for rising prices instead. CMAN has announced plans to promote the use of concrete road construction with the government and Dangote announced plans in August 2012 to widen its distribution by opening more 'mega-depots' and signing on new distributors.

It's unclear exactly how much cement the Nigerian market actually wants. Its per capita consumption is 110kg, compared to 280kg in South Africa and over 600kg in Egypt. This is way down the consumption/GDP curve compared to Europe and North America. Its population has reportedly risen by 30m from 2006 to 2012. This implies massive total demand and demand potential.

So - past massive transport infrastructure projects, improved distribution and possible price inflation - how does Nigeria keep momentum? Ironically, given Nigeria's protectionist stance against imports, one of the measures CMAN is exploring is how to export cement to other countries. Recent news reports about local producers in Namibia and South Africa fighting foreign imports suggest that other African countries are starting to 'arrive' too. Even building the roads may not be enough to keep Nigeria's cement express-train on track.