Cement use up 18% due to increased construction activity
Cement consumption rose 18% in the six months to June, driven by increased construction activity in the private sector that defied a spike in cement prices.
Latest data from the Kenya National Bureau of Statistics (KNBS) shows that 4.97 million tonnes of cement was used in the six months, compared to 4.06 million tonnes consumed during the same period last year .
Higher consumption has defied a sharp rise in the cost of the product, where the retail price of a 50-kilogram bag of cement has risen by at least 300 shillings since March due to rising raw material costs.
Private sector construction projects resumed this year after being suspended since 2020 due to the Covid-19 pandemic, which not only disrupted construction sites due to movement restrictions, but also caused a drop in demand for housing and offices as thousands of Kenyans lost their jobs.
In its half-yearly financial report released late last month, publicly traded cement maker Bamburi Cement highlighted higher volumes during the period, which helped it boost its revenue by 2.6%. at 20.1 billion shillings.
“This was driven by volume growth as well as the improvement in the average selling price compared to the previous year,” Bamburi said in the report.
The company, however, pointed to headwinds in the form of rising prices of imported inputs, which, if sustained, will likely not only affect cement companies’ profitability, but will also begin to eat away at demand due to high commodity prices. retailers.
Cement makers raised commodity prices citing the higher cost of raw materials – particularly the coal used to make clinker – due to the Russian invasion of Ukraine. Russia is one of the largest coal producers in the world.
But high input prices failed to overshadow activity in the real estate sector, with the value of construction projects approved in the six months to June nearly doubling to 85.23 billion shillings from 44.17 billion shillings at the same time last year.
Loans granted by banks to the real estate sector also increased by 13.9% during the financial year ended in June, indicating the continued recovery of one of the sectors most affected by Covid-19.
The revival of private sector projects comes at a good time for cement companies, now that major public infrastructure projects such as the Nairobi highway and the Mombasa bypass at Dongo Kundu, which had boosted demand in recent years , are either completed or nearing completion.