Cement shortage stifles the market

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No foreseeable silver bullet to rescue the situation

Shortage of cement hits the market hard as factories production go down.
Retailers in the city, contractors and builders shed light on heavy concerns to access cement even at twice its rate.
Contractors who are involved in different sized projects alarmed that they are engaged on building the backbone of the economy yet they face the hurdle of accessing cement.
“In recent times we have been buying cement at double the rate from distributors,” they explained their claim to Capital adding, “It is becoming more difficult to get cement at even higher pricing as there is a shortage of cement in the whole market.”
In the past months staffs that have links with the marketing and distribution have been twisting the access for their benefit, hacking the system and as a result have reaped the benefits of selling twice the original amount. Currently cement shops in over the city are sitting empty as lack of product becomes widespread.
The country’s production capacity at around 12Mt/yr. This compares to 15Mt/yr from 13 companies as reported by a local news source although this figure is likely to also include grinding plants. Yet the same source also placed the actual working capacity at 6Mt/yr due to old machinery and poor maintenance.
Unfortunately it also mentioned issues with security in the country reducing the overall production and became a live issue a few weeks ago with news that at least 30 employees of Dangote Cement were reportedly kidnapped in early December 2022 by an armed group that calls itself the Oromo Liberation Army. This is particularly alarming for the company given that its country manager was shot dead in 2018. Two employees of the Mugher Cement plant were also taken hostage by the same group in October 2022 although thankfully they were later freed.
Derba MIDROC Cement signed a contract with Sinoma International Engineering in recent weeks to build a US$282m upgrade at its integrated Derba cement plant in Oromia. The move is the latest in a steady stream of projects that have been announced in Ethiopia over the last few years. Other recent developments include a deal in July 2022 by businessman Getu Gelete to buy PPC’s stake in Habesha Cement and plans in August 2022 by investor Worku Ayetenew to build a US$1bn cement plant with a production capacity of 12,000t/day. Alongside these capital intensive projects, the government has been trying to regulate the price of cement through measures such as setting fixed prices, limiting the volumes that individuals can buy and asking producers to cut distributors out of the supply chain.
According to reports as for the market in Ethiopia, Dangote Cement said that its sales from Mugher plant rose by 1.8% year-on-year to1.7Mt in the first nine months of 2022 and that the unit was running at full capacity in the third quarter. It reckoned that it held a 42% market share during this period, out of a total market of around 4.2Mt. Previously, it said that the total market for the whole year was 7Mt in 2021.
Meanwhile, the government disclosed that it has taken several measures regarding cement distribution and its high price points. However things on ground seem different.
Despite the production being stated to be lesser than the market demand, experts who follow the sector claimed that the product is available in the market but the price is highly inflated.
In recent decisions of the Ministry of Trade and Regional Integration, individuals are no longer allowed to acquire over 15 quintals of cement at once for any construction works. Factories must sell cement to authorized agents only. Agents who are only approved by the regional and city administrations to have the right to hold the product, a move targeted at paralyzing unauthorized trucks or warehouses from hoarding.
It has been well noted that factories are working under production for reasons that stem from security, shortage of raw material as well as foreign currency.