Business
Chinese giant, Huacin’s, takeover of Lafarge Nigeria rattles cement industry
BUACem, DangoCem, other cement firms brace for war
The entry of China’s cement giant, Huacin Cement, into Nigeria has sent the nation’s cement industry into a frenzy, with established operators bracing for a major disruption, Business Hallmark’s findings have revealed.
The Shanghai exchange-listed cement manufacturer recently set a foothold in Nigeria with the acquisition of Swiss building materials firm Holcim’s 84 per cent stake in Lafarge Africa in a deal worth $1 billion.
The deal, which is expected to be finalized in the first quarter of 2025 with the approval of regulatory authorities, will transfer Lafarge Africa’s four cement plants in Nigeria, with a combined capacity of 10.35 million metric tonnes per year, to Huacin.
The acquisition of Lafarge’s four cement plants in Nigeria will make Huacin the second largest cement producer in Sub-Saharan Africa with a combined 28 million tonnes per year, behind Dangote Cement with an installed capacity of 51.6 million tones per year across 10 African countries.
However, with the acquisition of Lafarge Africa’s four cement plants in Nigeria with a combined capacity of 10.35 million tonnes per year, Huacin becomes the 3rd largest cement maker in Nigeria behind Dangote Cement with 32.3 million tonnes per year local installed capacity and BUA Cement with a current installed capacity of 17 million tones per year respectively.
Huacin started its expansion drive in Africa in 2021 to hedge against declining demand in China.
Before its latest acquisition of Lafarge Nigeria, Huacin Cement had acquired or outrightly built cement plants in six African countries of Zambia, Tanzania, Mozambique, South Africa, Zimbabwe and Malawi with a production capacity of 18 million tonnes per year as part of an overseas expansion spree to hedge against shrinking profit margins at home.
The recent acquisition of Holcim’s 83% shares in Lafarge Nigeria takes its production capacity in Sub-Saharan Africa to 28.35 million tonnes.
Meanwhile, mixed reactions have continued to trail the coming of Huacin. While Nigerians, especially builders welcomed the development, hoping it will set off a healthy competition that will ultimately crash the price of the product, cement producers are jittery of the bruising effects of Huacin’s expected strategies to gain a foothold in the cement market will have on the industry.
The manufacturers fears are not unfounded owing to Huacin’s antecedents in its spheres of operations.
According to BH findings, the Chinese firm had used its massive size, advanced technologies, pockets, and low pricing to gain control of the markets it operates in.
Huacin, checks showed, boasts 116 years of operations, having established itself as a leading company in China as well as the global cement industry.
Ranked as one of the top 10 manufacturing companies in China, Huacin Cement has consistently maintained an average annual compound growth rate of 25 percent in the last twenty years.
Operating Capacity
The cement company operates in over 300 branches and subsidiaries in China and overseas.
It presently operates more than 65 kiln (cement) production lines and 15 grinding stations with a total annual capacity of 118 million tons in China and other countries. It also operates 36 aggregate plants in China with a total annual capacity of 210 million tons.
Huacin has also been able to design and manufacture its own cement-making equipment from horizontal and vertical mills, high-efficiency separators, preheaters and pre-calciners, fourth-generation grate coolers, as well as equipment for waste pre- and co-processing and for sand and aggregates preparation.
Industry experts who spoke to BH on the matter all agreed that Huacin is going to reshape the nation’s cement industry.
According to Chief Oluwaseun Fanika, the founder of Ventax, a servicing company providing technical services to one of the cement companies operating in the country, established operators will no doubt lose some grounds to the newcomer.
“As with any business, those who can do it better and cheaper win a significant portion of the customer base.
“Dangote and BUA were able to run Lafarge that had been in existence in Nigeria for over 100 years out of the market using smaller and cost efficient plants and the employment of cheap labour.
“Their plants were largely manufactured in China, Turkey, and India, all countries that have been able to copy western technologies and adapt them to their own needs.
“Also, apart from tapping from the cheap Nigerian labour market, Dangote and BUA Cements also bring in most of their management and top level staff, including technicians and engineers, from Asia to manage their plants.
“Meanwhile, American and Western European firms like Lafarge are usually top-heavy. They are flooded with high-priced workers and expensive machinery that make their products uncompetitive in a highly competitive market like ours”, Chief Fanika said.
He, however, said that Chinese businesses, as a result of having the same survival traits with their Nigerian and Indian counterparts, will be able to quickly adapt to the tough operating terrain.
“Unlike Switzerland Holcim’s, Haucin can match Dangote and BUA in their games. It has access to a very large but cheap labour market in China and Nigeria at its service.
“Also, by deploying highly advanced but less expensive technology, Huacin has been able to produce cement that are more economical than its competitors in homeland China and across the globe.
“We can point to examples in Africa where Huacin’s European competitors easily lost ground to the Chinese giant, which can produce similar products at a lower cost through less expensive technology.
“It (Huacin) has been able to prove with its successes in African, Latin America and Asian countries that it can cope with difficult terrains.
“The question in the cement industry now is: To panic or not to panic? While I think it is too early to panic and play into the hands of the new player, I can predict that it will not be business as usual for established operators like BUA and Dangote Cement.
“However, they (local cement manufacturers) should expect a run for their money”, declared Chief Fanika.
Monopoly pricing
Nigerians have lately questioned the impressive year-on-year financial results declared by cement companies operating in the country, wondering how the cement industry, a sub-sector of the manufacturing industry, continued to declare huge profits and dividends year after year, while their counterparts in the real sector continue to grapple with macroeconomic pressures, including escalating cost of raw materials, elevated electricity tariff, transportation and finance costs, rising inventories and lower profits.
A recent report by BH revealed that, unlike their fellow producers in the real sector, cement makers have been increasing the prices of their products, prompting accusations of exploitation against them by users and stakeholders.
According to available records, the three biggest cement manufacturers in Nigeria (Dangote, BUA and Lafarge (now Huacin) effected four upward price reviews in 2024 alone.
For instance, in January 2024, a 50-kg bag of cement sold for N4,200 on average. Since the fourth increment in November 2024, cement prices have climbed to between N8,000 and N9,000 (an almost 100% hike), depending on the brand and location.
However, a brand and products specialist, Pascal Ideye, said that the end may be in sight to the unwholesome practice of price manipulation by cement manufacturers.
“Cement manufacturers’ gang-up is about to be broken. For Huacin Cement to succeed in Nigeria, it must first win over the market. And how best can it do that if not by offering cheap products?
“The company must first carve out a market for itself in Nigeria before it can even think of joining the cement cartel to fix prices, which I seriously doubt it will do.
“The cement market is already saturated. And Huacin will surely push up that capacity, meaning supply will outgrow demand.
“So, I believe each company will do everything possible to retain its market share, including crashing the price of its products like what we saw when Globacom entered the GSM market in 2003 and what we are presently witnessing in the downstream petroleum sector with the coming on board of Dangote Refinery.
“I see a price war coming. Nigerians should expect a price war soon, which I think is good for the building and construction industry”, Ideye projected.