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Update on Egypt
Written by David Perilli, Global Cement
19 June 2019
Tourah Cement in Egypt took the tough decision last week to temporarily stop production. It blamed this on an acute financial crisis rendering it unable to pay its running costs. The subsidiary of Germany’s HeidelbergCement was reported in the Global Cement Directory 2019 as already being partly closed. This latest news is regrettable but not surprising.
Graph 1: Cement consumption and production in Egypt. Sources: Industrial Development Agency, Global Cement Directory 2019, Cement division of the Building Materials Chamber of the Federation of Egyptian Industries.
As Graph 1 shows that the backdrop here is of a local cement sector rife with overcapacity. Capacity utilisation rates have hovered around 70% in recent years. The sector breaks down into about a quarter of production capacity under state control and the remainder owned by private companies. Overall, about half of the production capacity is run by multinational companies like Greece’s Titan, France’s Vicat and Germany’s HeidelbergCement.
The country hosts some of the largest cement plants in the world as well as several very big plants by European or North American standards anyway. The whopping 13Mt/yr government/army-run El-Arish Cement plant at Beni Suef opened fully in 2018. It seemed likely that there were going to be losers in the industry following that kind of disruption from a state-owned player. Indeed, Medhat Istvanos, head of the cement division of the Building Materials Chamber of the Federation of Egyptian Industries, explicitly blamed the El-Arish Cement plant for making the situation worse in September 2018. He said that the decision to build the plant was ‘not based on precise information’ and that it had harmed local production.
In the wider picture, the cement sector started to move away from subsidised natural gas and heavy fuel oil to coal instead in the mid-2010s. Tourah Cement mentioned this in its statement about halting production. The government has supported the cement industry through large-scale infrastructure projects and a state-sponsored compensation system under the Contractors Compensation Act that offset the loss prompted by the Egyptian pound’s floatation in 2017.
However, overcapacity has consistently been a problem and this was clear when the El-Arish Cement plant was approved. Exports of cement crept up to 1Mt/yr in 2017 from 0.1Mt/yr in 2015. Yet, as the Low-Carbon Roadmap for the Egyptian Cement Industry pointed out, Egyptian FOB exports of cement cost US$20/t higher than regional competitors such as Turkey. At this kind of disadvantage Egypt lacks the traditional escape route for an overproducing cement sector.
In these kinds of conditions, consolidation appears to be crucial while organic or government-backed demand plays catch-up with the production base. Certainly Egypt has the population and the development potential as its economy grows in the medium to long term. The government stabilising the economy after recent troubles is crucial for the construction industry. In the meantime all is not lost as the focus is on efficiency gains and cost cutting. The growth of alternative fuels as the sector’s fuel mix continues to adjust to the new normal following the abolition of subsidies on natural gas is one example of this.
Raoul de Parisot appointed as new president of Cembureau
Written by Global Cement staff
19 June 2019
Belgium: Cembureau, the European cement association, has appointed Raoul de Parisot, advisor to the chairman and chief executive officer (CEO) of Vicat, as its new president. He will succeed Gonçalo Salazar Leite, the Vice-Chairman of SECIL. Isidoro Miranda Fernandez, CEO of LafargeHolcim Spain, will assume the position of Vice President.
Philippines: Eagle Cement says that the opening of its new Malabuyoc integrated 2Mt/yr plant in Cebu has been delayed by six months to mid-2021. The new unit had been scheduled to start operation in late 2020, according to the BusinessWorld newspaper. The holdup has been blamed on delays in obtaining permits for the project. However, the company intends to start selling cement in the Visayas region by the end of 2020 as originally promised.
John Paul L Ang, the president and chief executive Officer (CEO) of Eagle Cement, made the comments at the cement producer’s annual stockholders' meeting. Work on the new plant started in late 2017. Once complete the new line will bring the company’s total cement production capacity to 9.1Mt/yr. The project also includes port facilities and cement terminals that will serve markets in Visayas and Mindanao. Eagle Cement also operates an integrated plant at San Ildefonso, Bulacan and a grinding plant at Bataan.
Uzbekistan: German companies Phoenix Consulting and MN Medianet are planning to build a US$400m cement plant in the Farish district of the Jizzakh region. The unit will have a production capacity of 4Mt/yr, according to the Trend News Agency. It will operate as UTD Cement. The new plant is intended to produce 0.98Mt/yr of M500 type cement, 1.22Mt/yr of M600, 0.94Mt/yr of M900 and 0.86Mt/yr of white cement. It will also create up to 1500 jobs.
Phoenix Consulting is an independent, privately owned consulting and trading company operating worldwide with a focus on the Middle East and Europe. MN Medianet operates in the automated control systems sector.
Rwandan government puts stake in Cimerwa on sale 19 June 2019
Rwanda: The Rwandan government has started to sell its stake in Cimerwa. It holds a 16.5% stake in the cement producer via the Agaciro Development Fund, Rwanda's Sovereign Wealth Fund, according to the New Times newspaper. Other shareholders, including SORAS Group, Rwanda Social Security Board (RSSB), and Rwanda Investment Group (RIG), have also expressed interest in selling their shares, making a total of 49% of shares available. The government originally intended to start the sale in March 2019. Potential buyers have until 5 July 2019 to register their interest.
Cimerwa produced 0.36Mt of cement in 2018, a figure well below its production capacity of 0.6Mt/yr. However, the country imported 0.32Mt of cement in 2018 to meet local demand. The company has also made a loss in recent years. The integrated plant is run by South Africa’s PPC, which has a majority stake in the firm.