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Cameroon: Concrete iron producers agree to lower prices, despite soaring energy costs

Cameroon: Concrete iron producers agree to lower prices, despite soaring energy costs
  • Comments   -   Tuesday, 24 October 2023 02:56

(Business in Cameroon) - Concrete iron producers in Cameroon have agreed to lower selling prices. The new price scale, which corresponds to a reduction of around 2% on all categories of concrete reinforcing bars used in the construction sector, was unveiled on October 20 by the trade ministry.

This aligns with the government's initiative to reduce the prices of certain consumer products on the market, thanks to the current easing of world prices for raw materials and freight. The issue was the subject of an October 17 letter from Minister Mbarga Atangana to the coordinator of the Cameroon Organization of Steel Processing Industries (Ocita).

Negotiating Price Adjustments

"In response to the government's request, we have agreed to lower our prices, providing consumers with increased purchasing power, given the notably less tense international backdrop compared to a few months ago. However, our willingness to accommodate the government's request doesn't mean our challenges have disappeared. We remain deeply concerned about the surge in energy input costs, a key factor in our companies' competitiveness," explains Patrice Yantho, coordinator of Ocita.

Starting in May 2023, about twenty companies relying on natural gas as a backup energy source in the face of recurrent power outages in Douala's industrial zones, including concrete-iron producers, found themselves in a standoff with the British oil and gas operator Gaz du Cameroun (GDC). GDC decided to increase the price of its product by 20%, with effect from June 1, 2023. However, manufacturers opposed this measure, with the support of the Ministry of Commerce, which criticized GDC for its unilateral decision, not respecting the regulatory procedures in force in Cameroon.

Despite the opposition, the company did not back down. Instead, it has threatened to suspend supplies to customers who failed to comply with the new tariffs incorporating the 20% increase.

Record production costs

As the largest consumers of energy, concrete reinforcing bar producers are even more opposed to this increase in natural gas rates, as it followed the January 2023 increase of almost 30% in electricity rates for "large accounts" customers, which include energy-intensive industrial enterprises; the extension since the same month of the Special Tax on Petroleum Products (TSSP) to natural gas consumed by manufacturers (CFA70 per m3); and the 36.5% increase since February 2023 in the price per liter of kerosene used by manufacturers.

Furthermore, before the 2023 energy cost hikes, which resulted in increased production expenses for companies and market inflation, the National Institute of Statistics (INS) reported a remarkable 13.3% year-on-year increase in factory-gate prices (prices paid to producers before taxes, subsidies, and transportation costs) in the industrial sector in 2022. According to INS data, the extractive and steel-metallurgy sectors were the primary drivers behind this surge, with production costs rising by 29% and 16.9%, respectively, compared to 2021.

However, starting from the first two quarters of 2023, there has been a "gradual return of industrial producer prices to their pre-Russian-Ukrainian crisis levels, primarily influenced by disruptions in global supply chains,” INS reported.

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