Amid promises of cheaper cement, new report projects price of commodity to remain high in 2024

Amid promises by the Chairman of BUA Group, Abdulsamad Rabiu to crash cement prices from over N5,000 per bag of 50kg to N3,500, a new report by Cardinal Stone, an independent, multi-asset investment management firm has projected that cement prices in 2024 will remain high.

The report released on January 9, 2024 titled “Nigeria Cement Rebounding from a Tumultuous Year” noted several factors that affected the cement industry in 2023.

Some of the factors, according to the report included the poorly executed naira redesign which led to cash scarcity, currency devaluation in June, and heavy rainfalls during the third quarter of the year.

The report projected that the sector will rebound in 2024 based on the increased infrastructure budget for 2024 at N1.32 trillion, the creation of the Infrastructure Support Fund (ISF) by the Presidency, active implementation of the Africa Continental Free Trade Agreement (AfCTA), increased production capacity, etc.

“In 2024, the Nigerian cement industry is expected to benefit from renewed government focus on infrastructure development and construction projects, which could stimulate demand for cement products.

With increased budget allocations to critical sectors and ambitious infrastructure initiatives (N1.32 trillion to infrastructure, which represents 5.0% of the total FG 2024 budget), the construction industry is likely to experience a resurgence.

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Cement manufacturers, in response, are beginning to recalibrate their production strategies in the form of capacity expansion and improved efficiency to meet the anticipated rise in demand.

While challenges may persist, the outlook for Nigeria’s cement industry in 2024 is one of cautious optimism, with potential growth opportunities emerging amidst the recovery phase” the report stated.

However, for pricing, the report noted that cement prices will continue to remain high in 2024 due to producers seeking to offset operational costs, volatility in the forex market, and high inflation.

It further noted that the possibility of a price war between players in reaction to BUA’s price reduction in October 2023 is slim but not impossible.

“Barring a potential price war between players in response to BUACEMENT’s ex-factory price slash, we maintain that average cement prices would remain elevated in Q4’23E and FY’24E as players aim to protect their margins from rising operating costs occasioned by still-high inflationary pressures and strong volatility in the foreign exchange” it stated.

By Babajide Okeowo

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