Displaying items by tag: Kenya National Bureau of Statistics

Nigerian billionaire Aliko Dangote was spotted attending the inauguration ceremony of Kenyan President William Ruto earlier in September 2022. This is relevant because Dangote’s cement company previously announced plans in 2016 to build two 1.5Mt/yr plants in Kenya, near Nairobi and Mombasa respectively. They were intended to become operational by 2021. Unfortunately, Dangote himself allegedly described Kenya as being more corrupt than Nigeria to Kenyan broadcast journalist Jeff Koinange a few years later and nothing more happened. Back in 2014 Ruto visited Dangote Cement’s Obajana plant in Kogi state in Nigeria when the politician was the Deputy President of Kenya. Dangote’s attendance at the presidential inauguration this month suggests at the very least that his relationship with Ruto remains active. Maybe more news on those planned plants will follow.

Graph 1: Cement in Kenya, 2018 – June 2022. Source: Kenya National Bureau of Statistics (KNBS).

The reason why the owner of Africa’s largest cement company might be interested in the Kenyan market can be seen in its latest cement production figures. Data from the Kenya National Bureau of Statistics (KNBS) shows that production for the first half of 2022 grew by 20% year-on-year to 4.95Mt in the first half of 2022, from 4.12Mt in the same period in 2021. Cement production was broadly similar in 2018 and 2019 at around 6Mt. It then increased by 25% to 9.25Mt in 2021 from 7.41Mt in 2020. On a rolling annual basis, production picked up at the start of 2020 and has risen consistently since then each month, peaking at over 10Mt in May 2022.

However, the elections in August 2022 probably slowed this growth trend, despite being much more peaceful than those in 2007, although the KNBS is yet to release the data. Bamburi Cement said in its outlook for the second half of 2022 that it expected markets to recover after the ballot. The subsidiary of Holcim reported increasing turnover in the first half of 2022, due to mounting sales volumes and price rises, but its profit fell sharply. It blamed this on fuel and logistics inflation, growing clinker import costs as well as negative currency exchange effects.

That last point about imported clinker is worth noting given that a government report in late 2021 found that the country had a clinker shortage of up to 3.3Mt/yr. Yet, the KNBS data in recent years shows that cement production and consumption are broadly similar, suggesting that the shortfall in clinker is being imported. The report added that 59% of the imported clinker originated from Egypt, tariff free, due to a free trade agreement. Local producers were reported to have been operating at a 65% capacity utilisation rate. Egypt and the UAE accounted for most of the imported clinker followed by Saudi Arabia. An interview in the Standard newspaper at this time with Bamburi Cement’s managing director Seddiq Hassani revealed that, despite locally produced clinker being cheaper than imported clinker, some producers were reluctant to hand control of a key input material over to their local competitors. Other producers, predictably, were trying to persuade the government to raise the duty on imports of clinker from 10% to 25%. Tariff discussions have continued in 2022.

So far in 2022 the other big stories in the sector have included Bamburi Cement’s plans to build two solar power plants and a major repair to the kiln shell at East Africa Portland Cement’s (EAPCC) Athi River cement plant. The solar plants will be built next to Bamburi Cement’s integrated Mombasa plant and its Nairobi grinding plant. Once operational in 2023 they are anticipated to supply up to 40% of the cement producer’s total power supply. Devki Group, the owner of National Cement, also announced plans in August 2022 to set up a wind farm near Mombasa. However, this seems more like an attempt to diversify the group into electricity production rather than to supply its own plant near Nairobi. EAPCC’s upgrade project has completed this week after about a month and half of work. It is intended to increase the plant’s cement production by 50%.

Cement production started in rise in 2020 but the Covid-19 pandemic may have constrained this. Production (and consumption) then jumped up in 2021 and looks set to do similar in 2022 bar a possible blip from the elections in August 2022. This is despite the global market issues arising from the end of Covid-19 and the war in Ukraine. These may be uncertain times but the fundamentals for the Kenyan cement market look positive despite rising end prices. Unsurprisingly, it looks likely that Dangote Cement remains keen to extend its business to Kenya.

Kenya: Cement producers recorded a 28% year-on-year increase in production in the first five months of 2021 to 3.35Mt from 2.65Mt in the first five months of 2020. The Business Daily newspaper has reported that the Kenya National Bureau of Statistics recorded a 27% increase in cement consumption to 3.35Mt from 2.64Mt. The increases follow a rise in infrastructure investment by the government, especially in the roads and dams segments. Increased credit requests by property developers also indicate a recovery in the private sector following the decline of the Covid-19 outbreak. Kenyan gross domestic product (GDP) growth is forecast at 6% in the 2021 full year.

Kenya: Data from the Kenya Bureau of Statistics shows that cement production fell by 6% year-on-year to 1.46Mt in the first quarter of 2019 from 1.55Mt in the same period in 2018. Cement consumption dropped by 3% to 1.46Mt from 1.50Mt. Cement consumption previously grew by 2.8% year-on-year to 5.9Mt in 2018 from 5.8Mt in 2017. However, production fell by 2.6% to 6.07Mt from 6.23Mt. Imports increased by around 50% to 23,000t but exports decreased by 63% to 0.14Mt from 0.39Mt, mainly due to a major drop in deliveries to Uganda and Tanzania.

Kenya: Cement production fell by 8.5% year-on-year to 5.64Mt in 2018 from 6.16Mt in 2017. Data from the Kenya National Bureau of Statistics also shows that consumption decreased by 5% to 5.49Mt from 5.79Mt. This follows drops in production and consumption since 2016. Local cement producers, including East African Portland Cement (EAPCC) and ARM Cement, have reported on-going financial difficulties since 2018.

Kenya: Cement consumption has fallen for the first time since 2000. It fell by 8.2% year-on-year to 6.2Mt in 2017 from 6.7Mt in 2016, according to data from the Kenya National Bureau of Statistics reported on by the Daily Nation newspaper. Reduced demand for building materials in the construction sector occurred at the same time as a fall in the value of building plans approved in 2017.

ARM Cement’s declining fortunes this week may signal the end of the current growth cycle in the Kenyan cement industry. The cement producer posted a 20% year-on-year drop in its sales revenue to US$52m for the first half of 2017. Its financial returns have been turbulent since 2015. However, inward investment from the UK’s CDC Group in 2016 had appeared to help the company enabling it to pay of debts and even consider an upgrade project to the grinding capacity at its Athi River plant.

Graph 1: Cement production in Kenya for first half of year, 2013 - 2017. Source: Kenya National Bureau of Statistics.

Graph 2: Cement consumption in Kenya for first five months of year, 2013 - 2017. Source: Kenya National Bureau of Statistics.

Unfortunately it now appears that the Kenyan cement market may have peaked in 2016. As can be seen from Kenya National Bureau of Statistics figures in Graph 1 and 2, production hit a high of 3.31Mt in the first half of 2016 and it has fallen to 3.18Mt for the same period in 2017. Consumption too has fallen, to 2.5Mt for the first five months of 2017. At the same time the value of building plans approved by the Nairobi City Council dropped by 12% to US$1.02bn for the first five months of 2017 with falls in both residential and non-residential applications although the decline in residential was more pronounced. One of the country’s larger infrastructure projects, the Standard Gauge Railway from Mombasa to Nairobi entered its final stage of construction towards the end of 2016 with the completion of track laying.

Bamburi Cement has also reported falling revenue and profit so far in 2017. Its turnover fell by 8% to US$170 and its profit decreased by 36% to US$18m for the half year. Bamburi blamed it on a contracting market, low private sector investment leading to residential sector issues, delays in some infrastructure projects and droughts. The drought also hit the company’s operating profit via higher energy costs. On the plus side though Bamburi’s subsidiary in neighbouring Uganda did record a good performance.

It’s likely that the general election in Kenya in early August 2017 has slowed down the construction industry through uncertainty about infrastructure investment and general fears about political unrest. Thankfully these latter concerns have appeared unfounded so far but the memory of the disorder following the poll in 2007, where over 1000 people died, remains acute. And of course the 2017 election is not over yet following the intervention of the Supreme Court to nullify the result of the first ballot and call for a second. A longer election period with the impending rerun will further add to the pressure on the construction and cement industries.

An industry report on East Africa in February 2017 by the Dyer & Blair Investment Bank fleshes out much of the situation in the region. One particular point it makes though is that, as it stands at present, building materials may be too expensive to grow the market fully. Dyer & Blair suggest that lower construction costs and more affordable home ownership methods might be the key to driving low end housing demands and in turn this might grow cement consumption.

With lots of new production capacity coming online both locally and in neighbouring countries such as Uganda and Ethiopia, the Kenyan cement market faces the dilemma of trying to balance the medium to long-term demographics with the picture on the ground. Low per capita cement consumption suggests growing markets but if the demand isn’t present in the short term then the impetus for cement producers to expand shrivels especially with aggressive imports, rising energy costs and growing local competition. Once the election period finishes the picture will be clearer but the boom times may have abated for now.

Kenya: ARM Cement’s revenue fell by 20% year-on-year to US$52m in the first half of 2017 from US$65m in the same period in 2016. Its loss for the period grew to US$14m from US$2.6m. Cement production dropped by 3.93% to 3.18Mt in the half year of 2017 according to data from the Kenya National Bureau of Statistics reported by the Kenyan Star newspaper. Cement consumption also fell during the first five months of the year, by 2.34% to 2.5Mt.

Kenya: Data from the Kenya National Bureau of Statistics report that cement exports dropped in value to US$7.6m in 2016 from US$25.6m in 2015. Cement producers have blamed declining volumes on cheap imports, according to the East African newspaper. The opening of a cement plant by Dangote Cement in Tanzania has also contributed to the decline, forcing companies to cut their prices.

Kenya: Growth in consumption of cement has slowed to 5.3% in the third quarter of 2016 from 11% in the same period of 2015. The slowdown in growth mirrors a fall in growth in the construction sector, which grew by 9.3% in the third quarter of 2016 compared to 15.6% in the same period of 2015, according to data from the Kenya National Bureau of Statistics. It attributed the fall in growth in part to a ‘considerable’ reduction in civil work on the Standard Gauge Railway from Mombasa to Nairobi as it nears completion.

Kenya: China exported cement worth US$19.8m to Kenya in the first half of 2016 compared to US$1.99m in the same period of 2015, according to data from the Kenya National Bureau of Statistics (KNBS). Despite this large increase in imports of cement, Chinese contractors working in the country, such as the China Road and Bridges Corporation which are currently building the Mombasa-Nairobi railway, have denied bringing the material into Kenya. They say they have only imported machinery and equipment for the large-scale infrastructure projects that they are working on, according to Business Daily.