Infrastructure under threat, cement prices to remain high in 2024

CEMENT prices are expected to remain high throughout 2024, further threatening infrastructural development and worsening the housing deficit in the country.

This was revealed in a new report, ‘Nigeria Cement Rebounding from a Tumultuous Year,’ by Cardinal Stone, an independent, multi-asset investment management firm.  

According to the report, cement prices will remain high in the year due to producers seeking to offset operational costs, volatility in the foreign exchange market, and high inflation.

“In 2024, the Nigerian cement industry is expected to benefit from renewed government focus on infrastructure development and construction projects, which could stimulate demand for cement products.

“With increased budget allocations to critical sectors and ambitious infrastructure initiatives (N1.32 trillion to infrastructure, which represents 5.0 per cent of the total Federal Government’s 2024 budget), the construction industry is likely to experience a resurgence,” it stated. 

While challenges may persist, the report indicated that Nigeria’s cement industry’s outlook for the year was characterised by cautious optimism, with potential growth opportunities emerging amidst the recovery phase.                                                                             

Infrastructure has been a significant concern and is expected to shape Nigeria’s development in 2024, The ICIR highlighted in a recent report.

The report predicted that it might take the country 300 years to bridge its infrastructure gap with the current expenditure allocation rate, as public spending has left infrastructure development in dilapidated states.

But despite a slash in prices from BUA Cement Plc in October 2023, Cardinal Stone’s report showed that cement pricing would remain elevated this year.

On Sunday, October 1, 2023, the management of BUA Cement announced a slash of the ex-factory price of a bag of cement by 36 per cent to N3,500 from N5,500, promising to review the price upon completion of the new plants, expected to increase its production volumes to 17 million metric tons per annum.

The BUA Group’s chairman, Abdul-Samad Rabiu, had told President Bola Tinubu that his company was increasing its production capacity by inaugurating two new cement plants at the end of 2023 or early 2024 to enable it to flood the nation’s markets with the product.

“Following BUA Cement’s ex-factory price slash to N3,500 in October 2023, we do not rule out possible price reactions from other players,” Cardinal Stone stated.

The organisation further stated that barring a potential price war between players in response to BUA Cement’s ex-factory price slash, the average cement prices would remain high in 2024 as players aim to protect their margins from rising operating costs occasioned by prevailing inflationary pressures and intense volatility in the foreign exchange.






     

     

    “Interestingly, we expect the impact of BUA Cement’s lower prices to take full effect from mid-Q1 ’24. A survey on the effectiveness of the price cut in October in some states – especially in Lagos, Abuja and Port Harcourt – indicated that the product was still sold at the old market price (N5,500 – N5,700 per 50kg bag) and scarce in other areas,” it said.

    In the nine months of 2023, cement sector volumes closed 7.1 per cent weaker on a year-on-year at about 20.62 metric tonnes, driven by -10.86 per cent declines in Dangote Cement’s Nigerian operation and -8.94 per cent in Lafarge Africa Plc.

    However, Lafarge Africa had to shut down its Mfamosing plant in the third quarter of 2023 for maintenance purposes ahead of an expected demand surge in the fourth.

    The report added that BUA Cement was the only player in the industry to experience volume growth of 5.4 per cent in the review period, aided by its capacity expansions and ability to obtain additional market share by ensuring more competitive prices against its peers.

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