Market price

Cement market price is 20% higher than ex-factory price due to logistics issues – BUA Group – Nairametrics

BUA Cement Plc Chairman and CEO Abdul Samad Rabiu revealed that due to logistics, the price of cement in the Nigerian market is about 20% higher than the price that dealers buy cement from manufacturers ( the ex-works price).

According to a transcript report by This day, he made the revelation during his opening address at the 2020 Institute of Directors dinner, to commemorate his admission as a Fellow of the Institute of Directors (Nigeria).

He explained that the unimpressive state of the transport infrastructure in the country has aggravated the logistical rigidity in the country, which has created bottlenecks in the supply value chain.

Bottlenecks in the supply value chain coupled with reduced production at certain players are, according to him, responsible for the increase in the market price of cement compared to the price from manufacturers to resellers.

According to him, the price of cement in the Nigerian market is currently around 20% higher than the price of cement ex works, due to logistical rigidities due to poor transport infrastructure and increased demand in the market.

Talking about BUA Cement Plc’s competitive advantage in the cement industry, Rabiu explained that factories in the industry are aging. However, he said BUA is one of the few to have new factories, and the company wants to increase the capacity of the installed factory to concretely close the demand gap by 2022.

What you should know

  • As per Rabiu’s projection at the event, Nigeria has the capacity to produce at least 300 kg per head or around 60 million metric tonnes per year, which is double our current production capacity.
  • In an effort to position himself for this opportunity, he revealed that a third 3mmt per year cement line in Sokoto is expected to be commissioned in mid-2021.
  • However, the company is also expected to start construction of 3 additional cement plants of 3 million tonnes each in Sokoto, Edo and Adamawa at a cost of $ 1.050 billion.
  • These factories with a cumulative installed capacity of 9 million metric tonnes per year, when completed by 2022, will position BUA Cement as the country’s second largest cement producer.
  • He also revealed his intention to consolidate the respective units under the Group’s food business segments, which he said would facilitate the listing of BUA FOODS on the Nigerian Stock Exchange by the end of 2021.