New Kenya cement industry study: Full steam ahead by 2017

Kenyan cement companies hit the brakes in 2012 when the industry reached the lowest growth rate in the last ten years. However, going forward the fortunes are expected to turn as cement demand is projected to expand 10 percent per year on average and exceed 6.3 million tons annually by 2017.

Kenya's cement consumption per capita is also forecasted to reach an important milestone in 2014 when it will surpass for the first time in its history 100 kilos per inhabitant, according to the CW Group, the leading global cement industry consultancy and research house based out of New York, USA, as it detailed the state and outlook of the Kenyan market in its ÔÇ£2013 CW Group Kenya Market Update report.ÔÇØ

According to the CW Group, ÔÇ£Kenya took a turn for the better in March 2013. The turning factor was materially driven by a non-violent outcome of the presidential election process held on March 4, 2013. Given the peaceful conclusion of the election, stalled investments are expected to ramp up and reach their full implementation during the second half of the year and onwards. The government has set aside consistent funds for infrastructure, energy and social programs, while residential consumption is also expected to lift the low cement consumption per capita of the country.ÔÇØ

In 2005, the cement demand in Kenya was at a mere 1.6 million tons. Since then, the market registered impressive growth, closing 2012 at almost 4 million tons in cement consumption. But the industry is not without concerns: Kenya is still dependent on large clinker imports, with over 1.2 million tons imported in 2012 mostly from China. The dependency on clinker imports is expected to continue as efforts targeted toward capacity expansion are mostly focused on cement grinding.

Along with the entrance of the seventh cement company in the Kenyan cement market at the end of 2014, three other cement companies are expanding their cement capacities: EAPCC, National Cement and Mombasa Cement. Their combined efforts are estimated to place the national nameplate cement capacity over 11.1 million tons by the end of 2017. Capacity expansions across the East Africa region add additional competitive pressure as do perennial fuel sourcing issues for clinker producers in the country.

But fundamentally, Kenya benefits from a favorable combination of economic strengths and opportunities, which assists the country in meeting the ambitious objectives detailed in the Kenya Vision 2030 program. Moreover, Kenyan cement companies provide a stable environment for domestic consumers as the market continues to be self-sufficient.

The CW Group analysts note that ÔÇ£the availability of quality limestone reserves in Kenya provides its cement companies an important competitive advantage, as most of the regional markets are lacking sufficient raw materials. However, environmental concerns and the resistance of local residents continue slowing down the process. Access to clinker will remain a key differentiator for the coming five-year period when it comes to product pricing and margins.ÔÇØ The expected inception of coal mining in Kenya can also bring some relief for cement companies against inflating fuel costs.