Cement Firms Fight for Clients as New Rivals Flood Market

Kenya’s top cement makers are aggressively pushing for a bigger market share in the wake of ongoing expansions and the rise of new players flooding the commodity into the market.

According to research by Standard Investment Bank, established manufacturers such as Bamburi and East African Portland Cement (EAPCC) are having a rough time protecting their turf from new players that have grabbed a significant share of their market.

The study, released last month, showed that Mombasa Cement – the maker of the Nyumba brand – now holds a market share of 15.8 per cent behind the country’s largest cement maker Bamburi, which commanded 32.6 per cent of the market as at the end of 2016.

The company that began operations in 2007 has dislodged EAPCC from the second to the third position with a market share of 15.1 per cent, slightly ahead of another newcomer Savannah Cement at 15.0 per cent.

EAPCC previously controlled 20 per cent of the market but this has been eroded by various factors among them corporate governance issues that have affected its operations.

ARM, listed on the Nairobi bourse like Bamburi and EACC, now controls 13.5 percent of the market, followed by National Cement — maker of the Simba brand — with 8.0 percent.

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National Cement was founded in 2008, while Savannah began operations in 2012.

The emergence of new players has brought about some stiff competition in the market, which has kept cement prices flat at Sh630 to Sh700 per 50-kg bag for the past decade.

To overcome price challenges, the manufacturers are now turning to innovative products such as high-strength varieties used in infrastructure projects as well as ready-mix concrete.

“We expect competition in high strength and ready mix concrete to intensify as producers respond to the growing demand from large-scale projects,” the SIB report says.

Despite the challenges, manufacturers are optimistic that the growth of the industry will persist in coming years and are investing billions of shillings in additional capacity.

Savannah Cement, for example, is expanding its Athi River plant to double its capacity from 1.2 million to 2.4 million metric tonnes by 2019. Bamburi and ARM are also upgrading their plants to add 900,000 and 650,000 metric tonnes annually in about two years.

Kenya’s cement consumption stood at 2.5 million metric tonnes in the first five months of this year compared to 2.56 million in a similar period in 2016.

This indicates a contraction in construction, one of the sectors that have been dealt a major blow by a decline in private-sector lending.

According to NIC Securities, the home builders segment of the cement market – accounting for 75 per cent of the demand – has been hit by a lack of credit hence the slowdown.

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