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Lengthy market chain behind doubling Cement price

Cement price doubled as traders charge twice the ceiling price set by the Ministry of Trade & Industry. A quintal of cement is now being traded between 530 and 550 birr in Addis Ababa, though the ceiling price for similar amount of the item is set at 290 birr.

The sharp increase in the price of cement is partly caused by the long supply chain in the market, involving producers, brokers, wholesalers and retailers, making it susceptible to hoarding and gouging practices, according to traders.

“I was hoping price would decline after the government introduced a price ceiling, but to the dismay of traders, almost nothing has changed,” said Mukerem Habib, a producer of bricks.

While cement factories have a little contribution for the price hike, brokers are accused of intentionally hoarding the item while retailers are unable to buy directly from factories.

“We get cement from agents and distributors with a price way higher than the ceiling price,” said Endris Kedir, who waited for almost three months to get cement from the state-owned enterprises tasked to supply cement to buyers.

“I pay between 520 and 530 birr for a quintal of cement from brokers. Adding my profit margin, it is obvious that I charge a price higher than the ceiling,” he added.

Producers of cement also blamed brokers for the price hike.

Fitsum Nigusse, a representative of the National Cement Factory, told The Reporter that his company is producing cement using its full capacity, which is 4,000 tons a day.

“The demand for the product increased and is small compared to what is being produced now,” he said.

According to Fitsum, his company and other 12 active cement producers are selling a quintal of cement at a factory price ranging between 280 and 290 birr.

“It is thus obvious that the price upsurge is not at factory level and it is other players in the supply chain inflating the price,” he said.

Lately, prices of construction material have been rising in the country, largely due to supply gap as a result of forex shortages, disrupting construction activities and forcing contractors to terminate operations.

A week ago, it is to be recalled that The Reporter reported the price of reinforcement bar shot up by 50 percent due to forex shortage, resulting in a closure of factories due to absence of imported raw material.