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October 07, 2008


Update on cement sector in Egypt

Egypt has long been a major source of natural resources like limestone and natural gas, among others that make up the key components of a thriving cement industry. Buoyed by low cost skilled labor, close proximity to high demand European markets and an emerging local economy, Egypt sits alone atop the regional cement production and export business.

Cement production in 2007 reached an estimated 38.5 million tonnes per annum in Egypt, while local consumption peaked at 34.5 million tonnes per annum in the same year, leaving the industry scrambling to meet local as well as overseas demand.

Egypt has 11 privately owned cement companies and one state owned producer namely National Cement Company. Several of the private companies are large multinationals, like Italcementi, Helwan and Tourah. Another major player is Lafarge, Alexandria Cement and Egyptian Cement. Italcementi and its subsidiaries produce some 11.4 million tonnes per annum of cement, while Lafarge accounts for 13.5 million tonnes per annum in output.

A construction boom, led by a number of high end resort and residential projects, has fueled local demand. In an attempt to curb the exponential increase in domestic prices, the government imposed export tariffs of EGP 65 per tonne on all cement shipped out of the country. When many exporters decided to take the tariff hit and continue sending their cement abroad, the export duty was raised again to the tune of EGP 80 per tonne.

The industry is poised to grow exponentially over the next four to five years. Last year alone, 14 new cement licenses were issued, worth some USD 3.3 billion, analysts expect that it will take at least three years to bring the new plants online. Existing industries are also planning expansions, with a predicted increase in total capacity of about 5 million tons in 2009.

The rewards of increased production, however, will be offset by the elimination of energy subsidies over the coming years. Cement producers and other industries will pay steadily higher natural gas and electricity prices; by 2010, the nation’s 40 largest energy consumers will pay market price; all industrial consumers will follow suit in 2013.

(Sourced from Business Today)