Increased freight charges slapped on importing coal and clinker have reinforced the case for local production to shield cement manufacturers from steep costs that have kept cement prices on the roofs.
Onset of Covid-19 elevated charges as importers of commodities such as coal, clinker and steel compete for airline spaces with transportation of health essentials such as personal protective equipment, masks and vaccines.
Bamburi Cement is among companies that have felt the impact of increased freight charges and expects them to remain high going into next year.
“We have seen costs increase on input products such as coal and imported clinker mainly driven by higher freight charges,” said Seddiq Hassani, Bamburi Cement chief executive in an earlier interview with Smart Business.
“There is very high demand for freight services, especially for Covid-19 supplies and so the rates for freight have increased,” he said.
Clinker
Yet, demand for clinker—a key ingredient in manufacturing of cement— has continued to increase in line with rising demand for the building material, reinforcing the need for relying on the local market to save costs and dollar reserves.
Kenya last year imported 2.008 million tonnes of clinker, up from 1.81 million tonnes in 2019, setting a new high for the country as Egypt and United Arab Emirates accounted for 92 per cent of the sourced commodity for Kenyan companies.
The value of this clinker was Sh8.65 billion, compared with Sh8.38 billion spent in the preceding year. The price per tonne of imported clinker has averaged Sh4,440 in the last five years.
Calls for attention to local clinker are once more coming into focus given that Kenya has four clinker production plants with a combined annual capacity of about eight million tonnes.
The annual output contrasted with imports of under two million tonnes in the last five years, means that Kenya can comfortably stop importing this crucial commodity and rely on local produce.
Only Bamburi’s clinker was operating at full capacity by last year in contrast to East African Portland Cement (30 per cent), Mombasa Cement (60 per cent) and National Cement—a member of Devki Group of Companies– (70 per cent).
National Cement plant churns out three million tonnes of clinker per year being about 1.5 times the volume of clinker imported into the country every year.
“Kenya’s missing link is that it takes a lot of time [to pass policies]. It has a lot of bureaucracy. There is sufficient clinker and we should not be importing,” said Narendra Raval, chairman of National Cement. “Tanzania banned clinker imports two years ago to promote local investors. Uganda and Rwanda are not importing. It is up to the Ministry of Industrialisation now.”
President Uhuru Kenyatta in February 2018 opened the Simba Cement clinker plant in Kajiado, terming it as a milestone in transforming Kenya’s manufacturing capacity.
Banning clinker imports or introducing taxes to discourage imports has been proposed as a sure policy to grow local industry and also increase job creation.
The proposal seeking to increase import duty on clinker from the current 10 per cent to 25 per cent was made by National Cement and Mombasa Cement.
Local firms
Passing of this proposal will hand an advantage to local firms, which are expected to ensure their supply is reliable, priced below that of imports and meets the quality demanded by cement makers.
A draft study commissioned by the Kenya Association of Manufacturers and released last month showed the average cost of imported clinker was $100 (Sh11,039) per tonne when landed in Nairobi.
It showed that the factory price for locally produced clinker was ranging between $47 (Sh5,188) and $85 (Sh9,383) per tonne, translating to a saving for cement firms opting for local clinker.
“The association participated in the verification mission, spearheaded by the National Independent Clinker Verification Committee, to assess the quality and quantity of locally manufactured clinker,” said KAM in response to Smart Business queries.
The committee consists of members from the State Department of Industrialisation, Kenya Bureau of Standards (Kebs), State Department of Mining, representatives from Cement Grinders and Clinker Manufacturers and KAM.
“The first draft of the report is currently under review, after which it shall be presented to the National Treasury. The report findings shall guide KAM’s final position on the EAC CET review and inform the Association’s budget proposals for the financial year 2022 –2023 and also inform sustainably the ongoing review of EAC CET,” it said. BY DAILY NATION