The expected impacts of Dangote cement price reduction

Of course I heard the information late like many people, up to 12 hours after it made it into the dailies that business mogul, Alhaji Aliko Dangote is about to slash cement prices by up to 40%. I got quite a number of calls from friends and readers of many of my articles on the supposed impact of this news in the building industry. My perspective on the whole thing are to be listed down in my points below;

1. How soon are we going to start buying cement for N1000.00?

I quickly called some of my heavy dealers in Dangote cement and questioned them about this, they said the company asked them yesterday to wait till 2 weeks so they could exhaust the old stock of cement before buying the new batch with lowered costs.

2. How much will you be selling the cement to us the unit consumers?

When I asked them this question, they were of the opinion that since they are supposed to be buying from Dangote at N1000.00 advertised, they will add their offloading charges and profit to the price, which means that you and me might be buying cement for between N1,100-N1,200, depending on your location.

3. Is this new cement exactly the same with the ones in the shops now?

They said its not! They said this cement will be of the 32.5 capacity, instead of the 42.5 in circulation now. Meaning that there is a possibility that this new cement coming in might not be as strong as the ones we are using now.

4. Will this mean that construction costs will fall overall?

Well it needs to be seen first, how much the prices will drop to and how the quality might turn out to be. If the fall is drastic and supplies constant, it might well ease off on project costs and benefit builders and home owners alike. It has the capacity to bring a construction boom if well managed.

5. What impact will this have on the other cement manufacturers and importers?

Do you that there is some news in the grapevine about the real reasons for the price drop being as a result of intense competition and a need to command more market share among cement producers? In this case the competition is expected to react, either reduce prices as well or increase quality, or even drop supplies, creating a heavy scarcity since Dangote is expected to flooded with a deluge of orders. What happens next? Another price increase to scare off surplus demands. Competition is unpredictable.

6. Will it affect the cost of rents, will landlords reduce rents?

That is like wishing for too much, since we have not even seen the reduction, but however there are other factors in construction which needs to drop before rents can drop. What about land costs and illegal fees? What about rods, sand, granite and labour costs, will they all soft-pedal like Dangote?

7. Does this have political undertones, especially ahead of 2015 general elections?

Don't put me in trouble, I don't know!