By VICTOR JUMA
In Summary
- Dangote is also constructing major cement plants in Ethiopia, Tanzania, and Zambia; pointing to a bruising market share battle once production starts.
- Kenya’s biggest cement maker, Bamburi, has a capacity of 2.25MTA (excluding its 0.9MTA factory in Uganda), making Dangote the biggest producer upon completion.
Nigerian tycoon Aliko Dangote has doubled the
estimated production capacity for his upcoming cement factory in Kenya,
pointing to a looming shake up of the market that could see a drop or
further stagnation of prices.
Dangote Cement, which already has a license to prospect for
limestone in Kitui, says it has revised the upcoming factory’s annual
production capacity to three million tonnes from the previous 1.5
million tonnes.
The company owned by the multi-billionaire
Nigerian, who is ranked among Africa’s wealthiest businessmen, is also
constructing major cement plants in Ethiopia, Tanzania, and Zambia;
pointing to a bruising market share battle once production starts.
“We are reviewing plans for Kenya with a view to
increasing the scale of our proposed factory from 1.5 million tonnes per
annum (MTA) to 3MTA,” Dangote says in a trading update report for the
first quarter of the year.
Dangote’s upcoming plants in Kenya, Tanzania, and
Ethiopia will give it a total capacity of 8.5MTA, putting it ahead of
Kenya’s Bamburi and Uganda’s Tororo that currently have capacities of
3.1MTA each.
Kenya’s biggest cement maker, Bamburi, has a capacity of 2.25MTA (excluding its 0.9MTA factory in Uganda), making Dangote the biggest producer upon completion.
The cost of building the Kenyan plant was estimated
at $400 million (Sh34.8 billion), but the decision to scale up its
capacity could see the capital outlay rise substantially.
“We are confident there will be sufficient demand both in Kenya and neighbouring countries,” says the report.
The multinational added that it is in the process
of upgrading its prospecting license issued by the Kenyan government in
March to a mining license, having found “ample sources of limestone”.
Dangote did not specify where it found the large
limestone deposit but the company has been linked with prospecting
activities in Kitui, where more cement firms are rushing, attracted by
the vast quantities of the raw material.
ARM Cement,
for instance, is expected to start construction of its $300 million
(Sh26 billion) Kitui factory in October in what will give it an
additional capacity of 2.9MTA.
Besides being rich in limestone, Kitui is also
attractive due to its proximity to the Mui basin which has large
reserves of coal. The coal is tipped to replace the relatively expensive
diesel fuel in firing energy-hungry cement factories.
Dangote’s entry into the East African cement market
is expected to intensify the raging price wars that saw margins plummet
to an all-time low of 22.1 per cent in 2012, according to estimates by
Standard Investment Bank (SIB).
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