It's the metical!

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It’s the metical!

6:12 CAT | 26 Jan 2021

The depreciation of the metical against the US dollar is the main reason for the hike in cement prices which is suffocating the civil construction industry, both private and public, in Mozambique.

As ‘Carta’ reported a few days ago, citing the National Inspection of Economic Activities (INAE), some outlets are selling a 50 kg bag of cement for 720 meticais, an amount that, even with the depreciation of the metical, the INAE considered speculative.

The truth, however, is that the factory door price of cement has risen because of the fall of the metical against the US dollar, in a context in which the main input for the manufacture of cement (clinker) is imported at prices set and paid in that currency.
At a press conference last week in Maputo, the President of the Association of Cement and Concrete Producers in Mozambique, Edney Vieira, detailed all the reasons that led the national industry to raise the price of cement.

Vieira, who is also Director of Cimentos de Moçambique, highlighted the slippage of metical as the key factor.

“Since February and March 2020, the US dollar rose from 61 and 62 meticais to 70 or 75 meticais. This represents a 25% increase in production costs, and clinker represents 80% of cement production costs,” Viera explained.

In addition to the depreciation of the metical, the increase in the price of electricity has also contributed to the price increase.

“The [cement] producing sector is an intensive consumer of electricity, which rose 17% in price last year, well above inflation. These factors impose a heavy bill on the sector. But the sector decided, because of the pandemic, to hold the price during the critical period. After that, in September we made our first price adjustment – a rise of about 15%.”
Even so, Viera maintains that the price hike falls short of covering the sector’s costs, with the industry recording losses of 10% from the commercialization of cement despite a 25% increase in production.

In order to minimise the costs of cement production in the country, the Director of Industry and Commerce, Sidónio dos Santos has welcomed the opening this year of the clinker and cement factory built 10 years ago in Matutuine, Maputo province.

According to Dos Santos, another challenge facing the 14 cement-producing plants in the country is the supply of packaging, saying that action is underway to open a packaging production industry to supply cement producers.

By Evaristo Chilingue

Source: Carta de Moçambique