Tanzanian production costs seen coming down, competition to increase

Cement production costs in Tanzania are expected to decline in the near future due to falling energy costs and improved supply. A study entitled “Equity Research Cement Sector Local Listed Companies” by Tanzanian Securities indicates that due to the expected entry of three new players, prices are also seen declining.

"We see an improvement in energy supply, introduction of new sources of energy and stabilisation of energy prices in the country as a special opportunity for cement producers".

Over the past two years the industry has had to meet with challenges relating to power rationing, higher energy prices and erratic power supplies. However, producers have started using alternative energy sources. "Energy supply has also improved in the past few months," the lead researcher of the report who also is the Chief Executive Officer of Tanzania Securities, Mr Moremi Marwa says.

Competition is expected to increase in the next 12 months so following the entry of three new cement plants: Athi River Mining’s 1.5Mta cement plant in Tanga and Dar es Salaam, Dangote Cement’s 1.5Mta plant in southern Tanzania and Lake Cement which is constructing a 0.5Mta cement plant expected to be completed in 2013.

"We project a drop in prices due to the expected entry of new players," the study indicates. The study released last week shows that favourable retail prices will give the country a comparative advantage over its competitors throughout Africa.

"We consider Tanzania's prevailing price of US120/t be competitively very low versus West Africa's US$200/t," the research analysts say: "Our projections show that prices will continue to fall to between US$90-105/t in the medium term and translate into higher export levels to available markets (of Rwanda, Burundi, DRC or Zambia (with a US$200/t price)".