Kenyan cement firms feel the squeeze

This week the Kenyan National Bureau of Statistics announced that KES2.2bn (US$21.7m) of cement was imported from China in the 1H16 - a 10-fold YoY increase. While full-year domestic cement consumption is forecast at 6Mta and installed production capacity is at 8Mta, cement imports appear surplus to the building sector’s needs.

Although Chinese construction companies claim to source their building materials locally, their impact on local production is becoming increasingly clear. Lafarge and ARM have already expressed their dismay at having been overlooked for large railway infrastructure projects, according to Bloomberg. In addition , Kenyan Ports Authority reported the import of 7000t of building materials by the China Road & Bridge Corp by July.

China's investment and expertise is wanted by Kenya
In December 2015 President Kenyatta welcomed China’s support to Kenya’s development agenda, particularly in infrastructure and industrialisation.

"My government is keen on the implementation of the various projects signed with China, particularly, the Standard Gauge Railway (SGR), which is critical in the realisation of Kenya’s development blue print – Vision 2030," Mr Kenyatta said.

He noted that the SGR project has achieved significant progress and more than 25,000 Kenyan engineers and workers are employed with their Chinese counterparts to build the railway.

More cement capacity due
Meanwhile, domestic cement capacity-building continues apace. Chinese turnkey supplier CITIC is currently building the delayed 1.2Mta West Pokot cement plant for Sanghi Cement, a subsidiary of Cemtech India. The facility will include an integrated kiln line and grinding unit as well as a 30MW power plant.

Dangote Cement has been importing cement from Ethiopia with plans to build its own 3Mta Kitui cement plant in Kenya for start-up in 2019. Dangote can export at US$74/t, 40 per cent below the price charged by locally-manufactured brands, reports The Nation.

Local cement producer ARM has plans to add to its current 1.2Mta clinker capacity in Nairobi with a new integrated plant at Kitui. ARM made a pretax loss of KES473.5m (US$4.5m) in 1H16 but was boosted by a US$140m investment from CDC in April to expand its cement production in Mwingi, Kitui County. Limestone reserves have been discovered at Ngaaie which will supply the new plant.

Bamburi Cement comes under pressure
The 1H16 results revealed that Kenya's market leader, LafargeHolcim-owned Bamburi Cement, saw its net profits decline to KES2.9m (US$28,633) on lower cement demand from the housing sector and construction markets.

Local producers fight back
In response to the anticipated rise in competition, domestic cement producers are upgrading their production facilities. At the end of 2015, East Africa Portland Cement installed a new baghouse to replace its existing electrostatic precipitators (ESPs) at its Athi River plant, as well as retro-fitted a new raw mill gear box and replaced three sections of the kiln shell. It also upgraded its bagging plant with new conveyors and electrical upgrades.

Meanwhile, Mombassa Cement has improved operations at its recently-expanded Vipingo plant in Kilifi County in April and is now targeting a clinker output of 9000tpd. 

Savannah Cement has also added a new roller press at its Athi River plant along with a new kiln feed and bucket elevator earlier this year.