Kenya's Devki to produce clinker next year

Kenya's Devki Group plans to start producing clinker from locally mined limestone in the next six months and mine copper in Democratic Republic of Congo by early next year, its head told Reuters.

Devki Chairman Raval Guru, which manufacturers cement and steel in Kenya and Ethiopia, and owns a copper plant in DR Congo, said the firm would invest about $160 million in the projects, mainly funded by commercial bank and syndicate loans.

"Mining of limestone, together with the clinker plant, will cost $140 million in Kenya," Guru told Reuters in an interview on Tuesday.

"We will need $20 million to start mining (copper) and process from there (DR Congo) and we have already invested in a $20 million plant there (DR Congo)," said Guru.

The group's National Cement produces 400,000 tonnes of cement per year but this will rocket to 2.5 million tonnes after expanding next year. Guru said this would make it among the largest in Africa.

Kenya depends on imports for clinker, a key ingredient in cement manufacturing. Its local production of clinker is seen reducing the cost of the end product by about 15 percent.

Against the backdrop of a booming construction industry boosted by heavy investment in infrastructure and real estate, demand for building materials such as cement and steel has been on a steady rise across east Africa.

Monthly demand for steel has doubled over the last three years to about 100,000 tonnes a month, with Kenya accounting for about two-thirds of that. Guru anticipated that, by 2015, Kenyan demand would top 120,000 tonnes per month.

Riding on the wave of east Africa's construction boom, Guru predicted group revenue would more than double to 45 billion shillings by 2013.

Devki has, however, put the construction of a $500 million steel plant on the back-burner due to the country's limited iron ore reserves.

Guru said he was now considering putting up a steel plant in Russia after being offered some tempting tax exemptions there.

A steadily depreciating shilling has also hurt Devki, which imports almost three-quarters of its raw materials such as steel billet, coils and wire rods, from South Africa, China, Russia and India.

Guru expected the price of the group's steel -- exported to Rwanda, Uganda, Burundi, Tanzania and Sudan -- to increase by 10 percent within two months unless the local currency strengthened.

"The weak shilling is the biggest challenge we have, then international commodity prices. Government needs to control foreign exchange rates to cushion us from such volatility," he said.




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