Nigeria's cement market shows no let-up

Nigeria is pushing its production full-throttle as cement demand begins to race ahead. Dangote Cement is revelling in high 1H18 sales volumes and competing cement companies are building new capacities to increase their market share.

"Our first-half performance was very strong and driven by an excellent recovery in Nigeria, where our sales volumes increased by nearly 14 per cent and revenues by more than 18 per cent," said Joe Makoju, Dangote's Group CEO.

Dangote Cement's total sales from its Nigerian pants were 7.8Mt in 1H18 which is 13.9 per cent higher than total sales of 6.86Mt (excluding exports) in 1H17. Second quarter sales of 3.84Mt were significantly higher that the 3.1Mt sold in 2Q17.

The IMF has forecast GDP growth of 2.1 per cent in Nigeria in 2018 and the cement sector is contributing with 1H18 sales of approximately 11.2Mt, up by around 10 per cent on the 10.2Mta in 1H17.

Production capacity is on the increase
This week, BUA Group announced the commissioning of its new 1.5Mta Kalambaina cement plant in northwest Nigeria, a project that includes a 32MW coal power plant. BUA Group now has a 35 per cent share in the Nigerian cement market and the new plant has already forced a reshaping of BUA group's structure.

The Cement Company of Northern Nigeria (CCNN), a subsidiary of BUA Group, is looking to further strengthen its position as owners of the 0.5Mta Sokoto cement plant, which has been operating at 98 per cent of capacity since last autumn. CCNN announced it would merge with BUA-owned Kalambania Cement Co Ltd to form a 2Mta cement company.

Sinoma also aims to commission BUA Cement's Obu II plant in Okpella, Edo state, before the end of this year. This is an expansion project that will add a further 3Mta line to the facility.

Ibeto Cement targets Ebonyi state
BUA Group is far from the only Nigerian company that is on a growth spurt. Earlier in the week, Ibeto Group detailed that it has given Sinoma an order to build a new 9000tpd kiln line next to the existing Nkalagu plant in Ebonyi state. The Nkalagu cement works in Ebonyi state formerly operated as state-owned Nigercem and is being rehabilitated.

Meanwhile, Ibeto also agreed with Sinoma for a greenfield 3000tpd cement plant to be built at Effium, Ohaukwu, Ebonyi State. This follows Ibeto Cement's US$390m development of a 6000tpd (2.2Mta) cement plant in Enugu state, which will also have a 45MW captive power plant.

Part of an ongoing investment plan, Ibeto secured US$850m financing from Milost Global Inc in May 2018. It has also recently acquired a 70 per cent share of Century Petroleum in USA, which will see Ibeto Cement listed on the US stock Exchange.

Cement consumption and pricing
Nigeria's domestic consumption is forecast to hit 53Mt by 2020, according to RMB Nigeria Stockbrokers (RMBNS). RMBNS analysts predict a seven per cent YoY rise in cement consumption in 2018, compared with a 17 per cent decline in 2017.

The commissioning of extra capacity at BUA's Obu II plant increases the risk of a fall in the price of cement, which could decline by as much as 12 per cent in 2018 after a 60 per cent increase YoY in 2017, says RMBNS.

Further capacity additions
Nigeria currently produces more than 40Mta of cement and new capacity additions are necessary to meet the rising demand fuelled by a 17m-unit housing deficit as well as the increased uptake of concrete in road building.

Dangote Cement is currently constructing an additional 6Mta of capacity at its Obajana works. Furthermore, the company has announced a 6Mta expansion at its plant Okpella, Edo state, and a new 6Mta plant at Itori with two new production lines scheduled to commence in 2019.

Meanwhile, Ashaka Cement (LafargeHolcim) has announced a 2.5Mta cement expansion at its Gamji plant in Gombe, which includes a 16MW coal-fired power plant. This project is scheduled to be completed in 1Q19.

There are also new entrants with International Cement Co Ltd proposing a 1.5Mta plant in Sagamu, Ogun state, and Southport Cement Ltd planning a 1.68Mta plant in Itori, Ogun state.

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