Cement prices fall as Uganda experiences a supply glut

Cement prices have fallen in Uganda due to a supply glut as construction in the country slows.

The price of a 50 kg bag of cement has fallen from 30 000 – 33 000 Ugandan shillings (UGX) in 2011 to UGX25 000 – 27 000 today, an average decline of around UGX6000.

Tororo Cement Ltd’s chief marketing officer and sales manager told press a few weeks ago that supply now outstrips demand and the company expects the price to stay at around the same level for the next three to four years. Though this ought to be good news for the real estate industry, housing starts have slowed as inflationary pressures and a hike in lending costs have forced many to put construction projects on hold.

Uganda’s two major cement manufacturers have both invested in expansion projects over the last few years, with Tororo Cement upping capacity to 1.7 million tpa in August 2011 and Hima Cement raising capacity from 350 000 to 850 000 the year earlier. This has been a factor in the increased supply, and in the resulting lower prices. Given the slackening demand, it is not known whether the two companies will be able to maintain their production levels – and if they do, with current pricing, this will inevitably mean reduced profitability. Tororo Cement has also been forced to drop its exports of cement, construction steel and galvanised iron sheets to countries such as DR Congo and South Sudan, where civil unrest have impacted demand.

However, the outlook is relatively bright. Per capita cement consumption in Uganda remains low at 35 kg, far below average, which should indicate an upturn in the future as the country continues to develop.

Edited from various sources by Katherine Guenioui