A new report by Cardinal Stone has revealed that cement prices in 2024 will remain high despite a slash in prices from BUA cement in October.
The report titled “Nigeria Cement Rebounding from a Tumultuous Year”, noted that the year 2023 was challenging for the nation’s cement industry occasioned by the poorly executed naira redesign which led to cash scarcity, currency devaluation in June, and heavy rainfalls during the third quarter.
However, it projects a rebound in the sector’s performance in 2024 based on the increased infrastructure budget for 2024 at N1.32 trillion, the creation of the Infrastructure Support Fund (ISF) by the Presidency, active implementation of the AfCTA, increased production capacity, etc.
For pricing, the report noted that cement prices will continue to remain high in 2024 due to producers seeking to offset operational costs, volatility in the forex market, and high inflation.
It further noted that the possibility of a price war between players in reaction to BUA’s price reduction in October 2023 is slim but not impossible.
It stated, “Barring a potential price war between players in response to BUACEMENT’s ex-factory price slash, we maintain that average cement prices would remain elevated in Q4’23E and FY’24E as players aim to protect their margins from rising operating costs occasioned by still-high inflationary pressures and strong volatility in the foreign exchange.”
Projected reduction in operational cost
Furthermore, the report also explained that increased adoption of natural gas in production kilns and distribution vehicles will significantly reduce operational costs for cement producers. This coupled with projected declines in natural gas prices globally will result in ease in cost pressures on cement producers and distributors.
It states, “We expect to see some of the current distribution cost pressure ease as players increase the adoption of the relatively cheaper natural gas to AGO, especially for distribution.”
Backstory
In September, the Chairman of BUA Group, Abdulsamad Rabiu announced the intention to crash cement prices from over Nthe N5,000 per bag of 50kg to N3,500 beginning from October 1. Cement prices have increased rapidly in the past year from around N4600 in May to over N5 today.
Despite the announcement slashing cement prices in September, checks revealed that retailers have kept on with the old prices ranging from N5,300 and N5,500 with distributors claiming to have old stocks or logistics costs pushing prices up.
