Dangote shakes Kenya’s cement market with Ethiopia imports
Nigeria’s Dangote Cement has started its shake-up of the Kenyan market with importation of cement from its plant in Ethiopia as it prepares to establish a local manufacturing plant. Dangote’s targeting Kenyan consumers with low-cost cement from Ethiopia is expected to further drive retail prices downward in a market where they have remained static for nearly 10 years.
Importing cement into Kenya is seen as Dangote’s short-term market entry plan as it prepares to establish a local plant in 2019. Dangote said the cement exported to Kenya is priced at about $74 (Sh7,400) per tonne, making it up to 40% cheaper than locally manufactured brands. The price is expected to incorporate the cost of transporting the cement to Kenya as well as taxes where applicable, while still leaving the company with a profit.
Dangote, which plans to topple LafargeHolcim as the largest producer of cement in Africa, rides on economies of scale to set lower prices that in turn grows its market share. Its plant in Ethiopia has an annual production capacity of 2.5 million tonnes. However, cement industry sources said the exports mainly covered supplies to road construction projects in northern Kenya.
Dangote cut prices of cement from its Mtwara factory in Tanzania to gain market share at the expense of rivals, including Kenyan multinationals with a presence in that market. ARM Cement said in a commentary accompanying its latest results that cement prices in Tanzania fell by a third in the half year ended June as a result of Dangote’s entry.
The company is expected to replicate its lower-pricing strategy in Kenya when it starts to produce cement locally in 2019.