Kenyan capacity to rise despite stagnant cement consumption

Kenya's cement sector is preparing for another cement capacity rise. Devki Group group's Cemtech Ltd subsidiary has submitted the environmental impact assessment report for a new clinker plant to the National Environment Management Authority (NEMA) for review. The project is the latest in a series of new clinker additions to Kenya's market that should see imports come under pressure.

Cemtech Ltd's proposed plant will be situated in Mwatsuma, Mwingi Central Kitui County. The total size and cost of the Cemtech Ltd clinker plant are yet to be confirmed. But Cemtech Ltd's proposal is just the latest planned clinker capacity addition. Other cement producers are also increasing their domestic capacity, adding 2Mta of cement grinding capacity by the end of 2024.

Kenya's additional clinker capacity is expected to reduce production costs, as producing domestic clinker is currently around 25-30 per cent cheaper than imports. Savannah Cement plans a new clinker factory costing US$500m to be built in Kitui County. The company currently imports its clinker as it does not have any clinker production facilities. In addition, Devki Group subsidiary, Simba Cement, recently came on-stream with an additional 6000tpd or 2Mta cement capacity at its West Pokot plant.

Furthermore, East African Portland Cement Co (EAPCC) has announced plans to invest US$200m in a new clinker factory in Kajiado County. This plant will have a clinker capacity of 5000tpa and is being located on a 300-acre site. EAPCC recently commissioned its Athi River plant to boost its cement production capacity by over 1Mta over the next two years, said the Star. A new kiln shell was added to the Athi River plant in 2022, resulting in a 38 per cent expansion in revenue.

By 2025 Kenyan producers are expected to add 4.4Mta of clinker capacity, taking the domestic total up to 10.7Mta, according to the Nation website.

Protection for domestic clinker producers
To support its domestic clinker producers, Kenya installed a 17.5 per cent export tax and investment promotion levy through its Finance Act in 2023 for commodities such as imported clinker. Correspondingly, imports of clinker dropped 38.4 per cent to 656,499t last year, according to the Business Daily. The value of imports fell 24 per cent to KES5bn (US$36.3m) in the same period.

Minimal growth in 2024
However, the rise in capacity comes amid stagnant cement consumption. The latest data for Kenya shows cement consumption contracted one per cent YoY in the YtD as of September 2023, amounting to 7.028Mt. Cement production was broadly flat during the same period, coming in at 7.332Mt.

For 2024 little or no market growth is forecast for Kenya's cement industry. Ongoing extreme weather conditions, after devastating flooding since March, are a downside risk to the sector this year while robust GDP growth of five per cent marks a slowing from 5.5 per cent YoY in 2023, according to the IMF. Inflationary pressures are expected to cool amid higher interest rates. The monetary policy rate is 13 per cent, up 425 basis points from a year ago. Tighter credit conditions will weigh on household spending and business investment plans. Government spending will also remain contained as it continues with fiscal consolidation. However, lower fuel prices will be welcome news for cement producers, supporting profitability at Kenya's expanding production base.