Cheetah Cement’s plant to re-enter cement market

Cheetah Cement’s plant to re-enter cement market
Published: 20 November 2006

Cheetah Cement is planning to re-enter the cement market without any serious losses. The plans include luring local retailers as well as the authorities to help block a possible second price war with Holcim group, which is currently taking advantage of the unprecedented increases in the demand for cement. 
 
Although Namibia is currently experiencing an unprecedented growth in the demand for cement, Cheetah Cement said it will not import any cement unless it is assured that there won’t be a price war with Holcim. "If we bring in cement now our competitors will drop their prices [below cost] to push us out. We know that," said Zedekias Gowaseb of Cheetah Cement. 
 
Holcim, the world second producer of cement, entered into a price war with Cheetah Cement, a local joint venture outfit with Brazilians, late last year. Cheetah Cement entered the market last year with intentions to establish a cement manufacturing plant at Otjiwarongo. The company was importing cement from Brazil at a lower price. This resulted in a price war with Holcim, which had reduced prices to as low as N$27 per bag forcing Cheetah Cement to suspend imports last October. Gowaseb said his company has realised that it cannot afford to engage in another price war. Instead it is engaging "interested stakeholders and the industry to see if the price war can be avoided." 
 
"We are willing to bring in cement and we can bring it in any time. Our contracts are secured. But we will be forced to sell our cement under cost. We know that is what they will do, we have seen it last year," he said. The unprecedented demand growth in cement in Namibia, said to be at 18%, has prompted Holcim to import cement from Malaysia and Brazil. The country’s normal monthly and annual cement consumption is at 25000 and 270,000 tons respectively. Holcim is importing 3% of its annual production to satisfy demand. The company has also pushed back prices to last year’s levels.
 
With imported cement from Brazil, Cheetah Cement was the first to offer low prices at N$35 per bag, which was lower than the N$60 per bag that Holcim was charging. 
 
"We have responsibly and gradually increased the price of cement in recent months in line with prevailing cost and market conditions to ensure the sustainable supply of its products in Namibia over the long-term. The latest price increase will bring prices in line with the prevailing prices of a year ago," says Wandile Zote, spokesperson for Holcim. Holcim said it will continue to import as long as demand outstrip supply.
 
For now, Cheetah Cement is concentrating on setting up the cement manufacturing plant at Otjiwarongo. It is however still to formally acquire land formally from the government, a process that is delaying the process of setting up the cement plant, said Gowaseb.