United Gypsum Investment limited, a locally based gypsum supplier has disclosed that the K20 to K25 price increase in retail 50kg cement prices should not be wholly blamed on gypsum prices as the commodity only accounts for about 5% or about K5 of the total price increase.
The cement manufacturing sector has been accused of forming a cartel following what looks like uniform price increase accords all major players, when the sector has different energy usage rates, energy sources (some use coal while other use electricity), different cost structures as well as different production capacity plants.
United Gypsum Investments has challenged cement companies in the country to be sincere and account for the other K15 to K20 price increase which has nothing to do with gypsum. “Gypsum is 5%, so from about K98 or K100 per 50kg bag of cement, if the input cost of gypsum increases from US$40 per ton to US$80 per ton, that should result in only about K5 (5% of K100) increase in retail prices.
The company however confirmed that Chambishi metals, which has since suspended production and is on care and maintenance, produced gypsum by-product was selling for about half the price and that cement companies have only recently started buying bulk gypsum from them [United Gypsum Investments] after the closure of Chambishi metals.
Chambishi Metals gypsum prices used to be about US$35 to US$40 per ton, but United Gypsum is selling for about US$80 per ton, so this is what has partly contributed to the hike in cement prices, according to Baudot Cement, who manufacture the Great Wall cement brand which is currently the most competitively priced cement product on the Zambian market
In an exclusive interview with Zambian Business Times – ZBT, United Gypsum Investment Limited General Manager Ali Ahmad disclosed that the company had not hiked prices but its the situation at Chambishi Metals that has resulted in some cement manufactures changing their source of gypsum to them.
Our gypsum prices have not changed as our cost of production is much higher. We are more specialised in supplying gypsum for Agro purposes and for roofing sheets. So, this bulk gypsum for cement is not our core business, but for now, we are supplying it to sustain the cement production and meet the demand to ensure cement production continues.
“Earlier this year, we approached all the cement factories and said guys, we can supply you the gypsum, our product has less moisture and might be more slightly expensive, but it’s natural and of high quality. They all said no thanks, you are too expensive”, he said.
And with the closure of Chambishi Metals, Ahmad said the cement manufacturers came back asking for the gypsum that they had rejected at first, saying the prices were much higher. That’s how this situation has come about. There has been no increase in our gypsum prices.
Furthermore he said that he remains loyal to his clients and is willing to sit on a round table to discuss how they can increase production and agree long term sustainable supply of bulk gypsum for cement producers.
“We have to agree on how best to proceed, if Chambishi Metals was to open today, some of these cement manufacturers would switch immediately and start buying from the mine, and what would happen to our investments in expanded production?”.
“Now the cement companies came to United Gypsum Investments saying they need our support. But the company has concentrated on Agricultural and roofing gypsum. Today on the market, Agricultural gypsum is sold at price range of between US$110 to US$140 per ton. But we agreed to sell bulk gypsum to cement companies at about US$80 per to support the emergency situation”.
“Like today, as a business, the people that are our long term customers have been from the agriculture market, these guys have been with us since we started. And agriculture is one of the main business in Zambia. I cannot say bye to them because I have new cement clients who we are not sure of their long term commitment, he said.
When asked by ZBT on whether they have capacity to supply gypsum at more competitive prices, Ahmad disclosed that they have the capacity and are willing to supply the gypsum for the cement factories but need to sit with both government and cement manufacturers to come up with a way forward.
United Gypsum stated that it is easy for Chambeshi Metals to sell gypsum at a lower price point because for them, it comes as a by-product of the main copper processing plant. But the natural gypsum is the best and of high quality for cement manufacturing.
The cement price hike has come at a time when least expected as key input cost variables such as energy costs, exchange rates and fuel prices have not changed to warrant the price increase.
The government agency responsible for consumer protection and anti-trust or anti-competitive market behavior – CCPC is yet to respond and issue a comprehensive investigation report as most of its key staff were said to be working from home due to covid 19.
