Cardinal Stone: Cement prices to remain elevated in FY’24

The cement sector in Nigeria has been experiencing significant price surges due to various factors impacting the market. Analysts at Cardinal Stone are predicting that the average price of cement will remain elevated throughout the year as manufacturers strive to protect their margins amidst rising operating costs caused by high inflation and strong volatility in the foreign exchange market. Adebayo Adebanjo, Cement and Energy Analyst at Cardinal Stone, shed light on the current developments in the industry during a recent interview on CNBC Africa. Adebanjo highlighted the challenges faced by cement manufacturers in managing the supply chain to maintain agreed price levels and curb price disparities caused by middlemen looking to protect their margins. While a recent meeting between major cement makers and the government led to a temporary price cut, sustaining lower prices will require stringent monitoring mechanisms and possible sanctions on distributors and retailers to ensure compliance. Adebanjo emphasized the need for effective oversight to prevent price hikes beyond the manufacturers' gate, noting that previous price slashes had not uniformly reached all regions due to existing inventory with distributors. Looking ahead, the cement industry is poised for growth in 2024, with a resurgence in infrastructure activities and construction projects expected to drive cement demand. Manufacturers are actively expanding their capacities to meet the anticipated increase in demand, with Boa Cement set to add six million metric tons of capacity this year, bringing its operational capacity to around 17 million metric tons per annum. The government's focus on cement-paved roads and the introduction of an infrastructure support fund are further expected to boost demand for cement in the construction sector. Despite the positive outlook for the industry, Adebanjo warned that cement prices are likely to remain elevated amid ongoing economic challenges, though efforts will be made to ensure affordability for consumers. Manufacturers are expected to leverage higher prices to safeguard their margins against external pressures such as foreign exchange volatility and inflation. As Nigeria continues to be a net exporter of cement since 2017, the cement sector remains a key player in the country's economy, poised for growth but facing challenges in price management and supply chain oversight.