• Monday, July 15, 2024
businessday logo


Cement industry fortune tumbles as output drops 40%


Year-on-year (y-o-y) output in the non-metallic products sector, which is dominated by the cement segment, fell steeply by 40 percent in the first half of 2014 (H1 2014), according to latest data released to Real Sector Watch weekend by the Manufacturers Association of Nigeria (MAN).

This demonstrates that recent positive records in the sub-sector may have tumbled.

Output in H1 2014 nosedived to N86.61 billion as against N143.87 billion reported in H1 2013, representing 40 percent fall.

Compared with the second quarter of 2013 (H2 2013), it was found that output in the sub-sector within the period under review recorded 60 percent pratfall. Hence, the sub-sector’s output nosedived from N215.8 billion to N86.61 billion.

Non-metallic products sector incorporates manufacturers of cement, glass, ceramics and chalk. But this sector is largely dominated by cement, according to MAN.

MAN says drop in output in the non-metallic group and some other industries may be attributed to challenges posed by incessant power outages in the country, especially in industrial zones.

“Also the internal strife, linked to religious uprising in the Northern parts of the country contributed to lowering production as markets were curtailed due to sales and movement challenges across some parts of the country,” MAN says.

However, beyond power sector failure and Boko Haram insurgency in the North, controversy in the cement industry over grading, which was fierce in HI 2014, may also have contributed to output crash within the sector.

In February 2014, a civil society group alleged that 32.5N/R cement grade, manufactured by Lafarge WAPCO, the United Cement of Nigeria (UniCem), Ashaka Cement (AshakaCem), Atlas and Cement Company of Northern Nigeria (CCNN), was responsible for incessant building collapses in the country.

Dangote Cement (DangCem), which produces 42.5N/R grade en masse, questioned why other manufacturers would be allowed to produce 32.5N/R grade when they allegedly had no licence to do so.

There were series of accusations and counter-accusations as well as stakeholder meetings. The Standards Organisation of Nigeria (SON) also summoned meetings and set up committees to harmonise and recommend cement grade applications.

This could only achieve little results, prompting the House of Representatives’ hearing on the matter. An ad hoc committee set up to hear the matter found that of all cases of building collapses investigated by relevant independent professional bodies in the country, none was traced to substandard cement.

But the legislators recommended 42.5N/R grade as minimum standard for construction work because, according to them, it is less susceptible to misapplication and most stakeholders will prefer it if given the chance to choose between 32.5N/R and 42.5N/R.

Consequent upon this, SON brought out a new guidelines, which stated that 32.5 grade be restricted to plastering, while 42.5 be used for general purposes. This did not augur well with those producing 32.5 grade en masse, as they saw it as a de-marketing strategy and headed for court.

“Why I am most surprised is the process that was followed,’’ said Joe Hudson, the then CEO, Lafarge WAPCO, told Real Sector Watch.

“When you change standards, you know there are lots of stakeholders and you have to get them on the table; you have to have discussions around implications. And frankly, that was not done,’’ Hudson said.

“If this is the way we manage key regulatory issues in Nigeria, then it does send a very strong message to people wanting to come in,’’ he said.

Analysts believe incessant court cases and high expenditure on public relations within the period might have taken some toll on the sector.

The Business Confidence Index released by the Lagos Chamber of Commerce and Industry (LCCI) in the third quarter of 2014 showed confidence of cement and construction players had fallen to 8 percent in Q3 as against 15 percent recorded in the first quarter (Q1). LCCI attributed this confidence dim to the new cement policy introduced by SON.