New entrants in Kenyan market ring alarm bells

New entrants in Kenyan market ring alarm bells
22 November 2010

Devki Steel Mills, National Cement, which trades locally as Simba Cement began operations this month while rival Mombasa Cement is concluding the construction of a new clinker plant close to the East African Portland Cement on the outskirts of Nairobi.

National Cement joins what many observers see as an already crowded but lucrative market. The plant, which cost KES2.8bn (US$35m) to set up, according Kaushik Pandit, a director at the firm, has a daily capacity of 2000t but with plans to boost this to 2500tpd as local demand increases. Mr Pandit told the Sunday Nation that it will use its strong presence in the building and construction industry to gain market share in the cement industry.

“It is a one-stop shop for builders. We have been in the steel industry for the past 25 years, also in iron sheets and now cement. We are leveraging on our existing channels of distribution,” he said. A 50kg bag of Simba Cement retails at KES650, while other players charge as high as KES800 according to local sources.

Other new entrants include Mombasa Cement, as well as Cemtech Sanghi, who are set to challenge the dominance of the established players – Bamburi Cement, East African Portland Cement Company and Athi River Mining.

Rising competition has seen market shares change. Second-quarter statistics reportedly show that Bamburi’s market declined from 62% last year to 50%, while East African Portland Cement increased from 18% to 20%. Athi River Mining, which manufactures the Rhino brand, saw its market share remain steady at 10%, while the new player, Mombasa Cement has reportedly seen its market share rise from 10 to 20%.

In its half-year 2010 results, Bamburi Cement, a subsidiary of France’s Lafarge said its market share has been eroded by the entry of new players staging a price war. Analysts also report that the entry of National Cement and other new players, despite good growth in demand (estimated at 10-12%), will result in capacity surplus in Kenya, placing further pressures on domestic producers.

The East Africa Cement Association, the cement producers’ lobby, estimates that surplus in the market will grow to 2.4Mt in 2012 from the current 200,000t expected for 2010.
Published under Cement News