Cement Glut: Dangote, Lafarge Record 1.47m Tons Unsold Stock

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The cement sector of the economy, weekend, closed the year with huge inventory of unsold cement and clinker with the two biggest manufacturers, Dangote Cement PLC and Lafarge WAPCO Cement Nigeria Plc recording 1.47 million tons of unsold stock.

Figures obtained from the two manufacturers show that Dangote had unsold stock of 950,000 tons while Lafarge had 520,000 tons.

During a visit to the Lafarge WAPCO Cement plant at the weekend, the Plant Manager, Lakatabu 11, Mr. Lanre Opakunle, said the glut was caused by the increase in local production of cement and the continued importation of subsidized cement.

He said the company was experiencing low sales and high inventory, adding that over 60,000 bags of cement are waiting to be purchased.

“It is unfortunate that the industry is experiencing such glut so soon in the investment circle when the manufacturers are yet to recoup significant part of their money.

“The market was dull during the rainy season. The current period is supposed to be the peak of production and demand. But the reverse is the case as there is no demand. It means something is wrong. About 220,000 tones of clinker are on ground not being used.

“Most of our workers are roaming. Ninety per cent of our trailers are idle. We are operating at less than 50 per cent capacity. The cost of production is high. Our plants are experiencing challenges. The situation is terrible.

“Some of the clinkers are being moved to another place. Once the place is filled up, we have no choice but to shut down.”

Opakunle said energy cost accounts for over 35 per cent of production cost in Nigeria compared to less than 10 per cent in China.

He added that the price of Low Pour Fuel Oil (LPFO) has increased from N25 per litre in 2009 to N107.76 per litre in November, an increase of 331 per cent.

He said: “Haulage is another factor out of the control of the manufacturers. Its cost accounts for between 20 and 25 per cent of the open market price of cement. Bulk products are affected by this factor due to the deplorable condition of Nigerian roads.

“Despite this disadvantage, local cement manufacturers have kept their ex-factory prices constant, an average of N1, 450 per bag since 2009. Input costs continue to rise.

“The manufacturers have been absorbing considerable cost, which, put differently, is a form of consistent reduction in the ex-factory price of cement, by keeping the price stable despite the rising cost of production.”

He said production in countries, such as China, is lower than in Nigeria, adding that cement plants in China use coal, which is very cheap compared to the LPFO used in Nigeria.

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