Kenyan: Real estate boom lifts Kenyan cement production

Byszheng

Updated Tue, 11 Aug 2015 10:06:38 GMT

Cement production and consumption increased over the first five months of the year on the back of a real estate boom and increased expenditure on public infrastructure.

The amount of cement produced between January and May climbed to 2.53 million tonnes from 2.3 million over a similar period of 2014, the Kenya National Bureau of Statistics said in its leading economic indicators for June.

The growth overshadows earlier fears that competition from low-cost Asia rivals would deal the industry a blow after the east African ministers excluded the commodity from a list of protected items.

The volume of cement consumed also climbed to 2.26 million tonnes over the five months to May compared to 2.05 million in 2014, mainly driven by demand from numerous infrastructure projects, including the construction of roads and the standard gauge railway.

“Demand for cement increased by more than 10 per cent during the first half of the year throughout East Africa, driven by infrastructure and housing construction,” ARM Cement Ltd said in an update when it released its half-year results on Thursday.

The region’s council of ministers last year removed cement from a list of “sensitive products” and said partner states would continue applying a 25 per cent import duty on Portland cement – the most common type of cement used for housing and infrastructure construction.

The decision was anticipated to hurt local producers by triggering a reduction of prices due to competition.

Under the sensitive list of products covered by the EAC Customs Union Protocol, cement imports into the EAC were to face a 55 per cent tariff, but this was to be reduced at a rate of five per cent every year from 2005.

The duty comprised a 25 per cent common external tariff (CET) and a suspended duty of 30 per cent.

The partner states had also agreed that the CET on cement should be reduced by five per cent each year for the subsequent four years to stabilise at a target rate of 35 per cent by 2009.

However, EAC member states removed the product’s sensitive status in June 2008 due to cement shortages because of construction of stadiums for the 2010 World Cup tournament in South Africa. The import duty was then reduced from 40 to 25 per cent.

The local producers say reduction of import tariff on cement has led to an influx of cheap imports from India, China, and Pakistan with market insiders saying shipments from those countries sold at 50 per cent to 60 per cent below the domestic market price.

Data by KNBS, however, showed both production and consumption of the commodity in Kenya still climbed over the period.