Report predicts rebound in cement sector’s performance, elevated prices

ANEW report has projected a rebound in cement sector’s performance in 2024 based on the increased infrastructure budget for 2024 at N1.32 trillion and the creation of the Infrastructure Support Fund ( ISF) by the Presidency, as well as active implementation of the African Continental Free Trade Area ( AFCFTA) and increased production capacity.

The report released by Cardinal Stone revealed that the insistence of the Federal Government on constructing concrete roads across the country may cause a spike in cement price to N9,000 from the current N5,500 per 50 kilogramme bag.

It predicted that cement manufacturers might favour the supply of the product to government contractors, who will utilise the product for concrete construction as against unit buyers, if the new thinking in government cycle pulled through. According to the report, cement prices will continue to remain high in 2024 due to producers seeking to offset operational costs, volatility in the forex market, and high inflation. It stated: “Barring a potential price war between players in response to BUA cement’s ex- factory price slash, we maintain that average cement prices would remain elevated in the first quarter of 2024 as players aim to protect their margins from rising operating costs occasioned by still- high inflationary pressures and strong volatility in the foreign exchange.”

The new report, entitled: “Nigeria Cement Rebounding from a Tumultuous Year”, noted that last year was challenging for the nation’s cement industry occasioned by the poorly executed naira redesign, which led to cash scarcity, currency devaluation in June, and heavy rainfalls during the third quarter.

It said that cement prices in 2024 would remain high despite an official slash in prices from BUA cement in October, stressing that the slash remains mere academic paper as the price has refused to climb down. Cement is a major component in building construction, serving as a binder substance, hardens and adheres to other materials to bind them together.

The Chairman of BUA Group, Abdulsamad Rabiu, had last year announced the intention of his brand to crash cement prices from over N5,000 per bag to N3,500 beginning from October 1. But the price has remained unchanged.

Major retailers have kept on with the old prices ranging from N5, 500 and N5, 700 in major locations even as distributors claim to have old stocks or logistics costs pushing prices up.

According to the report, increased adoption of natural gas in production kilns and distribution vehicles will significantly reduce operational costs for cement producers. This coupled with projected declines in natural gas prices globally will result in ease in cost pressures on cement producers and distributors.

The Cardinalstone report also predicted that some of the current distribution cost pressure might ease as players increase the adoption of the relatively cheaper natural gas to AGO, especially for distribution of products.