The cost of building materials has risen to levels so high that many are shelving the idea to build their homes. Those repaying mortgages are also feeling the pinch of rising repayment rates as banks continue to raise these rates.
All this has been blamed on the weakened shilling, whose value to the dollar passed the sh.100 mark for the first time ever. All however is not doom and gloom as cement prices remain largely unchanged.
A silver lining is cost of cement. The competition among cement manufacturers has held cement prices relatively compared to other materials such as reinforcement bars, paints and so forth.
As each manufacturer strives to maintain their market share, raising prices may be untenable. Consumers will only move in search of better prices.
It also is some good news that the shilling is beginning to strengthen. A weak shilling means that importing raw materials is more expensive, with the cost being passed on to the consumer.
Some bad news though, the price of cement may also rise as other factors affecting the cost of building materials in general come into play.
The rise in fuel prices means higher transportation costs. Indeed, manufacturers are citing a 20% rise in transport costs. Retail price may rise by about sh.30 for a 50kg bag, as transport accounts for about 20% of the retail price.
Energy costs constitute about 38% of production costs in cement factories. The rise in crude oil has also led to raised electricity bills, also affected by the recent drought.
It seems then that the only way for cement prices is upwards.
However, as stated above, manufacturers need to protect their market share and passing on the costs to the consumers may not be tenable.
The competition being experienced in the cement industry is expected to keep cement costs relatively stable amid rising cost of building materials in Kenya.
Some prices for a bag of cement from the different manufacturers are as follows,
Mombasa cement – sh. 658
East African Portland cement – sh. 701
Simba cement – sh. 677
Bamburi – sh. 708
Athi river mining – sh. 685.
(Prices courtesy of business daily)
The construction industry has been largely hit by the rising cost of building materials; an increase in cement prices will only further the damage to one of the best performing sectors in Kenya’s economy.