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Demand for cement increasing – UniCem MD

By BusinessNews Staff on March 23, 2014

The Managing Director of United Cement Company of Nigeria Limited, Mr. Olivier Lenoir, speaks with MUDIAGA AFFE on the situation in the cement industry and the company’s new cement line

Currently, the price of a 50kg bag of cement hovers between N1, 800 and N2,000, what is responsible for this high price?

Recently, prices have increased. But I want to state that if we look at the last two years, prices had been very stable all over the country and in the South-East and South-South, the prices have been the lowest. The recent increase might be attributed to internal and external factors. First, the cost of production is part of it. There is the high cost of energy occasioned by the shortfall in the supply of gas.

Again, there is the issue of various levies imposed on us and we have to comply. Similarly, the distribution of the product is another reason for the high cost. The roads are bad and this will cause the cost to increase.

Finally, there is also the impact of supply and demand. The demand for the products is increasing but I want to believe that the price will stabilise in the long term.

Recently, the Dangote Cement announced the construction of a 52.5 cement grade, the first of its kind in Africa. Is UniCem thinking along this line too?

I think the competition on products is good for the market and it is good for the end users. The initiative is good, but in our case, it depends on the usage and the needs of the customers. We can substantiate from different products if we think it is the right way to go. Our focus in that regard will be to have different cement types for different applications. For now, UniCem is just producing two types. If there is an increase in the demand from the construction industry for another type, we will do so. Our anticipation for now is that the other grade will not cover more than two per cent of the total cement consumption in Nigeria. If however, it is required by our customers, we will do so.

There are concerns over collapsed building being experienced, could it be attributed to the quality of cement being used?

I disagree with that. All the producers of cement in Nigeria are delivering quality products. We are working with the normal standard, especially in UniCem, because all our products have the right specifications which are enforced by the Standards Organisation of Nigeria. So, there is no substandard product coming from producers. Apart from the SON checks, we have always ensured internally that the specifications are strictly maintained and we have not recorded any incident on the use of our cement since the opening of the plant in 2009. We have read of some incidences in the construction industries but they were not caused by the quality of cement. One reason for building collapse is poor design. And most of these incidences occur in the informal sectors where you have unqualified persons handling the duties of professionals. Some of these people may want to cut cost to complete the projects by ignoring standard procedures. There is hardly external supervision of the projects by professional bodies.

There is also the absence of soil test before projects are executed by these unqualified persons. This means that the foundation will be faulty. While there is standard for cement quality, there is no standard for the cement mix used for making concrete (and bricks). But we are seriously working on that with our consumers.

What has been the challenge of powering the plant over the years and transporting your products?

It is good that we are making progress in terms of production. However, there are two major concerns, which are energy and gas supply. The plants have been running on gas since the beginning of 2011 and we have been faced with supply issue in the last nine months. This, of course, has an impact on costs. We need to get steady supply of gas. Again, the alternative, which is diesel, is very expensive, two or three times more. Unfortunately, we cannot run this business if we do not have steady supply of gas.

We are also faced with the challenge of road networks. You are aware that the roads leading out of Calabar are in very bad shape and that is a major challenge to us, transporting our products to neighbouring Akwa Ibom, Ebonyi, Abia, Enugu, Rivers states.

UniCem is embarking on the construction of another cement line; could you shed more light on the project?

This project was conceived a long time ago and now we are happy to inform the public that construction work has begun. The contractors are already on the ground. We are eager to deliver this project to the consumers and also to continue the production of high quality cement. This is to extend our capacity to five million metric tonnes per annum in line with the present demand for cement in Nigeria which is quite high. The cost of this project, a 2.5 million MT new cement line is N84bn and the construction work will go on in the next two or three years.

Our plans, however, is to have it inaugurated in the later part of 2016 if everything goes as planned. While this project is important for the company, it will also drive a lot of economic and social growths. There will be direct and indirect creation of jobs during and after the construction stages.

How is UniCem able to embark on this project especially under the harsh economic condition?

To us, the economy is not doing badly, especially in the cement industry. The demand is increasing. In 2013 alone, we had 15 per cent of increased demand compared to the previous year. The demand is very strong and this is driven by the increased construction in the housing sector and also road construction. Last year alone, the total cement consumption in Nigeria was 21 million metric tonnes which is a significant increase compared to 2005 when it was only nine million metric tonnes. This is more than 100 per cent increase over the years. We foresee the same increase in the coming years in the construction industry. The future of the cement is great and we want to maintain our market share in the South-East and South-South.

Again, in specific terms, what level of employment will this generate?

This new project will drive more than 1,000 jobs, part of which will be by the contractors. This will be of economic benefit to our host communities and the state in general. We will follow up and ensure that the local communities contribute to the employment process. Again, with the completion of the second line plant, more people will be employed to run the plant. The transport industry is also not left out as there will be increased capacity when the plant is completed to distribute the products.

What is the present production capacity of UniCem?

Like I said, we are going to double to five million metric tonnes per annum, which means our present capacity is 2.5 million tonnes. Our objective is to optimise the production capacity. We have an assurance of quality quarry reserve, among others. So, what is important is to start the plant so that the construction will be optimised. We already have the backing of our partners, the construction companies and our project team.

What would be your advice to government on how to improve cement production?

I urge government to improve on the infrastructure and stabilise the power sector. It should also ensure steady gas supply. Efforts should be made to ensure it is well distributed. Government should also harmonise taxes because you know the products are transported nationwide and each time they cross a state, they pay levies and this is what normally leads to increase in price. There should be harmonisation of taxes and levies at the federal and state levels.

[Punch]

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