• Tuesday, April 16, 2024
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BusinessDay

Cement price: Looking beyond limestone as local raw material

To describe the situation in the building materials market in Nigeria in the last two months as dire is to downplay what is clearly a near-tragedy that has befallen the market, crippling not just the whole building and construction sector, but also taking food away from many dining tables.

Within this period, the prices of these materials, especially that of cement, have risen so high that Nigerians are perplexed and afraid that whatever is called affordable or low-cost housing in the country will soon become a pipe dream if nothing is done urgently to arrest the drift.

In less than 30 days, the price of cement rose by almost 200 percent from between N5,000 and N5,500 in January to between N12,000 and N15,000 in February 2024.

Part of the worries with high price of cement is that, unlike some other commodities in the market whose prices have also gone up because of their exposure to foreign exchange crisis, cement is produced locally with limestone, which is the major raw material for its production, sourced locally along with other inputs that include clay, marl, alumina, iron, silica, and gypsum.

It is expected, therefore, that the price of this product shouldn’t go the way it has gone, high inflation rate notwithstanding. But experts are looking at this thinking differently.

According to them, anybody looking at the current skyrocketing price of cement should look beyond the raw materials which are sourced locally and, therefore, supposedly unaffected by the crisis in the foreign exchange market which is cited by manufacturers as a major reason for price increases.

They explain that the spike in the price of this product which is regarded as the king of construction because of its centrality in almost all aspects of construction—housing, roads, bridges—is a response to market realities and the way they affect the manufacturers.

The experts spoke at the annual BusinessDay Property Investment (PRINVEST) conference in Lagos last week with the theme, ‘Navigating Real Estate Dynamics: Balancing Rural to Urban Migration Population Growth, and Economic Impacts.’

“The manufacturers are simply adjusting the price to their cost of production. It is not only the cement manufacturers. It cuts across sectors. Many companies have shut down and those that are still in business are struggling with soaring logistics and diesel costs plus double taxation,” Emeka Eleh, Principal Partner at Ubosi Eleh + Co, noted.

Eleh explained that logistics cost has increased since after the petrol subsidy removal which has seen the price of petrol go up by over 200 percent to N600—N700 per litre, up from N162 per litre. He added that the manufacturers also contend with poor state of the roads in the country.

Diesel price, he noted, has also gone up from between N850 and N900 per litre in January this year to N1,700 per litre at the moment. Cement manufacturers need diesel to power their generators. They also need diesel to power the heavy machinery used for blasting the raw materials extracted from the quarries.

Obinna Onunkwo, Founding Managing Partner and Deputy CEO at Purple, shared this view, stressing that government needs to do something, not through price control but by addressing the obvious challenges which these manufacturers face such as the issue of inflation, volatile exchange rate, energy costs, among other challenges.

The federal government at the peak of the cement price hike called for the meeting with the major cement producers and other relevant stakeholders in the cement industry. It was agreed at the meeting that a 50kg bag of cement should for N7,000 and N8000 depending on location.

This was followed by a directive by President Bola Tinubu to the cement producers to reduce the price of cement further as it was largely unaffordable at the agreed price of N7000 to N8000 per bag.

As another followed to this presidential directive, Ahmed Dangiwa, the minister for housing and urban development threatened the manufacturers that the government would allow massive importation of cement if the price was not reduced across the country.

“The government stopped importation of cement in other to empower you to produce more and sell cheaper,” the minister said, adding, “clearly, this is a crisis for housing delivery. An increase in essential building materials means an increase in the prices of houses.”

As if the price crisis in the cement market was not enough, iron rods prices have also gone up significantly in the last 30 days. Within this period, the price of 16mm rod has risen from N8,500 to N18,500 and that shows exactly N10,000 prices increase, representing over 100 percent increase.

Both cement and rods are very important components of building and construction materials. Rods are of different sizes for different uses. Structural engineers recommend 12mm, 16mm, 20mm, 25mm, 10mm, or 8mm, depending on the strength of the material and other design specifications.

They are generally used for load-bearing purposes and they include cold steel, pressed steel, hot deformed bars, and mild steel plain bars. The type commonly used in enhancing the strength of concrete in beams and pillars or columns of buildings falls under the hot rolled deformed bars.