Cimerwa explains hike in cement prices

The Rusizi-based cement production plant has resumed production after a month of inactivity due to works to upgrade it. Julius Bizimungu.

People in the construction industry have lately been grappling with a shortage in supplies, a situation that has prevailed for over a month now.

Consequently, the prices for the cement by Cimerwa, the leading cement manufacturer in the country, increased by nearly 50 per cent in some parts of the country.

In just a matter of weeks, in Kigali for instance, a bag of Cimerwa cement rose from Rwf8700 to Rwf12000 (37 per cent increase). A bag of imported cement also rose from Rwf8500 to Rwf10500 (23 per cent increase).

Out of Kigali, in areas such as Gatsibo District, Cimerwa cement prices rose from Rw8700 to Rwf13000 (49 per cent increase) while imported increased cement from Rwf8500 to Rwf11000 (29 percent increase).

Following these concerns, Cimerwa has come out to clear the air, with company officials saying that the shortage was caused by temporary shutdown of its plant in Bugarama, in Rusizi District.

Addressing the media at their plant in Rusizi District, Bheki Mthembu, Cimerwa’s chief executive officer, said that the plant has been undergoing routine maintenance and upgrade for almost a month, which caused pressure in the market.

“The upgrade and maintenance caused a lot of anxiety and pressure in the market place, with some people taking advantage to speculate on cement prices,” he said on Monday.

He said that even though the shortage of cement at distribution points caused price hikes, some players within the supply chain are to blame since the price of their cement has never changed during the maintenance process.

Mthembu, however, acknowledged that the shutdown of the plant for 26 days caused pressure within the market, delays in some individual construction activities and increased the backlog of nearly 5,000 tonnes from consumers who needed cement during that period.

Cimerwa currently enjoys more than 50 per cent of the market share, enough to cause frustration among consumers if the firm stops producing cement for a single day.

For the period of 26 days, Cimerwa made major maintenance and upgrades on different sections of the plant including replacements of heat exchanger bypass, raw mill internals, clinker cooler plate, bag filter and limestone weigh feeder, among others.

They also revealed that they improved operational design by replacing the old Chinese technology that the company had deployed with a new German technology.

Journalists who visited the plant were able to witness some of the major upgrades, and the firm was optimistic that the upgrades would increase efficiency.

For instance, the raw mill internals upgrade will increase raw mill throughput by at least 15 per cent, and over all, the ramp up production would go up by 30 per cent, they said.

According to John Bugunya, the Cimerwa’s chief finance officer, the entire exercise to upgrade took up to USD3.3 million (approximately Rwf2.8 billion).

“It was not an easy decision to spend all that money. We had to convince the board that it was really needed. We see growth in the next few months,” he noted.

The activities saw the company suffer make 65 per cent losses during the month of upgrades, but the CEO said that this did not have a negative impact on its financial performance for the quarter that ended last month.

With the maintenance of the plant now complete, the market is expected to normalise but Cimerwa indicated that it would take up to two to three weeks for the firm to clear the entire supply backlog it has.

Until end of last year, Cimerwa was producing 380,000 tonnes, but it is expected that the plant would now be producing up to 500,000 tonnes per annum.

However, the plant has not been able to produce to its full capacity of 600,000 tonnes.

The demand for cement in the country, they say, has been growing and that will continue growing as more infrastructure projects come up. The firm is betting on cashing in on this.

Data from Rwanda Revenue Authority shows that last year, at least 79,573 tonnes of cement was imported from Tanzania while an additional 164,814 tonnes were imported from Uganda.

High prices of coal

While the Pretoria Portland Cement subsidiary has invested in upgrading the plant that they commissioned in 2015, the cement producer has been struggling with rising international coal prices.

Mthembu highlighted that that the ban of coal imports in Tanzania, where the firm gets its coal, greatly affected the plant’s production. The company relies heavily on imported coal from Malawi and Tanzania.

“But we are hoping to get alternative sources of fuel in two years’ time, after the Kivu methane gas project is completed. We really spend a lot on importing coal,” he said.

The operation of the plant has also been compounded by power outages, but officials said Rwanda Energy Group was working to fully fix its transmission lines.

editorial@newtimes.co.rw

 

Have Your SayLeave a comment