North African cement focus
Written by Peter Edwards, Global Cement Magazine
Thursday 10 October 2013
North African nations have seen varying amounts of political disruption in recent years, with revolutions in Egypt, Libya and Tunisia and disruption in Morocco and Algeria. Construction, and hence cement production, has been a low priority as a result. In some countries the cement industry is also battling higher fuel costs. However, recent expansions may signal a brighter cement future for Africa's north coast.
Next to the vital trade routes that pass through the Strait of Gibraltar, Morocco has developed a mixed economy based on exports to its EU neighbours across the Mediterranean. However, despite relatively dynamic markets and ranking 13th out of 54 African nations in terms of GDP/capita, Morocco is still poor by international standards, with high food costs representing a particular burden.
Above: Summary statistics for Morocco in 2012.
Morocco has 13 cement plants and its total capacity is 22.8Mt/yr. Much of the cement industry is today owned by Lafarge, Holcim, Italcementi and Camargo Corrêa units. Cimentos de L'Atlas (CIMAT) is the only Moroccan-owned producer,
Lafarge Maroc is Morocco's largest cement producer, with four plants. Its largest plant, a 4.5Mt/yr facility at Bouskoura, is also Morocco's largest. Other plants acquired by Lafarge over the years include the 1.2Mt/yr Meknès plant (built in 1945), its 2.5Mt/yr Tétouan plant (2000) and its 1Mt/yr Tangier plant (1954), which give it a total Moroccan capacity of 9.2Mt/yr.
Holcim operates three cement plants in Morocco, at Fes (1.9Mt/yr), Settat (1.8Mt/yr) and Oujda (1.2Mt/yr), which give it a total capacity of 4.9Mt/yr. The Settat plant was expanded from 0.9Mt/yr in 2012. Holcim also operates a grinding, bagging and distribution centre at Nador and a bagging and distribution centre in Casablanca. Italcementi Group operates in Morocco through Ciments du Maroc. It has three cement plants, which are located at Agadir Aït Baha (2.2Mt/yr),
Safi (1.0Mt/yr) and Marrakech (1.4Mt/yr), as well as a grinding centre in Laâyoune (0.25Mt/yr), which is expandable to 0.5Mt/yr in the future. Integrated capacity is 4.6Mt/yr. The bulk of Italcementi's assets come from its 1999 purchase of Moroccan group Asmar, although it opened the Agadir Ait Baha plant, built by Denmark's FLSmidth, in 2010.
The only Moroccan player in the market is Ciments de L'Atlas (CIMAT), launched by businessman Anas Sefrioui in 2007. It commissioned Germany's Polysius to simultaneously construct two identical cement plants in the nationally strategic regions of Ben Ahmed and Beni Mellal (both 1.6Mt/yr). CIMAT aims to become a major player in Morocco.
The final player in the market is Asment de Témara (1.3Mt/yr), located in Ain Attig and owned by Camargo Corrêa of Brazil. The plant was part of a large-scale asset swap between the plant's previous owner, Portugal's Cimpor and Camargo Corrêa in mid-2012.2
Figure 1 shows Moroccan cement production and GDP/capita for the past two decades. As with many nations there is a strong correlation between these parameters, although Morocco has historically used relatively little cement compared to its neighbours.
|Jan - Aug||9.4||-10.2|
In 2011 the country hit consumption in excess of 500kg/capita/yr, consuming around 16.1Mt, 11% up on 2010.1 However, in 2012 consumption fell by 1.6% to 15.9Mt/yr.1
Between January 2013 and the end of August 2013 Morocco had consumed 9.4Mt/yr of cement, with Grand Casablanca and Tangier-Tétouan consuming the most.1 The eight months to 1 September 2013 saw cement consumption down by 10.7%. August 2013, saw a year-on-year improvement of 9.2%, possibly due to Ramadan moving backwards relative to the Gregorian calendar into July 2013.
The decrease in cement consumption mirrors a decline in economic growth in 2012. It is likely that this has been due, at least in part, to the continued slowdown in Morocco's export partners like Spain (17% of exports) and France (21%) in southern Europe. The Moroccan economy grew by 3.2% in 20123 compared to estimates of 4.5%. GDP growth is now forecast as 3.9% for 2013, 5.6% for 2014 and 5.9% for 2015.4
The Peoples' Democratic Republic of Algeria endured a bloody separation from its former colonial ruler France in the 1950s and has since been a relatively unstable nation. Most recently it experienced political disruption in 2011 following revolutions in Tunisia and Libya. At present, the country relies to a great extent on its oil revenues, a resource that the government is keen to exert control over. Oil provides 95% of export earnings for the country. Since the 2011 protests the government has made attempts to generate additional revenue streams. At the start of 2013 it was expected that the government of Abdelaziz Bouteflica would present a new constitution in 2013, although elections in 2014 may be diverting attention from this task.
Above: Summary statistics for Algeria in 2012.
Algeria has 16 integrated cement plants with a combined capacity of 21.9Mt/yr. The Arab Union for Cement and Building Materials (AUCBM) states that in 2012 the country had a capacity of 20Mt/yr and that it produced 19Mt/yr.5
Algeria's cement industry includes a number of older government-owned cement plants that, despite their age, are currently capable of supplying the country. These are operated by Entreprise des Ciments et Derivés d'Ech-Cheliff, ERCC, Entreprise des Ciments et Dérivés Est and Société des Ciments de Tebessa. Unlike Tunisia and Morocco, foreign companies do not feature heavily in the Algerian cement industry, although Lafarge has a 35% stake in plants at M'Sila (5.0Mt/yr) and Oran City (2.5Mt/yr).
Egypt's ASEC Cement also has interests in the 1.2Mt/yr Société de Ciments de Zahana plant at Zahana and is involved in the construction of a 3.2Mt/yr FLSmidth plant in Djelfa City, 300km due south of Algiers, due to come online in 2015.
The Algerian government is currently implementing a large capital spending programme, which points to a steady increase in demand for cement in the future. Oran City and Algiers' ports will be redeveloped using concrete (and hence cement)6 and over 2200km of major arterial motorway projects are planned. Numerous other routes will be upgraded.
In light of this current and future demand, gradual increases in cement capacity and GDP growth forecasts of 3.2% for 2013 and 4.0% for 2014,7 the Algerian cement industry could be in for an increase in demand in the coming years. Some more interest may come from outside the country, although the current capacity is closely matched to demand.
However, with cement imports currently available from southern EU countries, there are few drivers for multinationals to increase their presence in Algeria in the immediate future. A continued protectionist stance by the Algerian government likely hampers the country's efforts to attract foreign investment in the cement and other industries. Its rules dictate that only 49% of any given enterprise can be controlled by a foreign investor, with 51% remaining in Algerian hands.
Relatively high levels of corruption and high administrative barriers to business are other factors that may hinder general economic development and hence may dampen cement demand growth.
Tunisia was recognised as independent by former ruler France in 1956. A one party state existed from that year until 1987, when a bloodless coup gave power to Abidine Ben Ali in 1987. Ben Ali ruled the country until the popular uprising against his regime in January 2011, which ended when he disbanded the government and fled.
The country is now headed by Interim President Moncef Marzouki, who is leading the preparation of a new constitution. A free election will be held on 17 December 2013.
With greater agricultural prospects and well-established tourism sectors, Tunisia is better placed to deal with the effects of its revolution than other north African countries. Tourists are returning and neighbouring Libya and Algeria are becoming more stable. However, the country has a large number of unemployed workers, both skilled and unskilled, with
17% unemployment. Other fundamental grievances that prompted the 2011 revolution (high food prices, poverty and corruption), remain major obstacles.
Above: Summary statistics for Tunisia in 2012.
The first cement plant to be established in Tunisia was Ciments Artificiels Tunisiens (CAT), which was founded in 1932. It was the only Tunisian cement plant for over 20 years and was nationalised in 1977. In 2000 it was taken over by Italy's COLACEM, which expanded the plant from 0.25Mt/yr to 1.0Mt/yr with the installation of a new dry process cement line.
Over the years CAT was joined by several other government cement plants, including Ciments de Bizerte (1953), a 450t/day semi-wet plant. The plant was expanded by the government in 1978 with the completion of a 2000t/day dry line. Today it operates at 0.8Mt/yr.
Brazil's Camargo Corrêa is another major international cement producer with a base in Tunisia. It operates the 1.2Mt/yr Cimenterie de Djebel Oust plant, a former government installation that it acquired from Cimpor as part of an asset swap in 2012.
Other domestic, state-owned companies that have been transferred to foreign hands include: Société des Ciments de Gabes, a 1.1Mt/yr plant sold to Portugal's SECIL; Société des Ciments d'Enfidha, now 88%-owned by Spain's Cementos Portland Valderrivas Group, and La Société Tunisio-Andalouse de Ciment Blanc (SOTACIB), a 0.6Mt/yr white cement plant that is now 65%-owned by the Spain's Cementos Molins.
Another player in the country is Carthage Cement, which has constructed a 2.3Mt/yr cement plant at Jbel Ressas, with consulting services from Switzerland's PEG and equipment from FLSmidth. The plant is currently being commissioned, with the first firing of the kiln on 6 September 2013.
A new plant project, currently said to be a 3Mt/yr US$300m project, is being carried out by Ciment de la Méditerranée Gafsa. A plant at the site has been on the cards for several decades. It is not clear whether or not the plant will be commissioned in the immediate future. Elsewhere, SOTACIB has plans to increase its production with a new grey cement plant mooted at El Baten Kairouan.
As Figure 3 shows, Tunisia's cement production grew from 4.2Mt/yr in 1998 to 7.6Mt/yr in 2008. By 2010 it had risen to 8.0Mt/yr, with a production capacity of 10Mt/yr. Despite its 2011 revolution, and a 1.1% fall in GDP in that year, Tunisia had a cement consumption rate of 564kg/capita/yr.8 Cement consumption increased by 12.3% year-on-year in 2012.9
Tunisia has strong primary, secondary and tertiary industries and is experiencing a resurgence in tourism. The economy is expected to grow by 3.4% across the whole of 2013 and accelerate to 4.6% growth in 2014.10 However, it is worth noting that similar figures were in the offing for 2012 and 2013 respectively 12 months ago. For now, slow-but-steady growth appears to be the trend for Tunisia. Newly-commissioning Carthage Cement and the expanded SOTACIB are best positioned to benefit from the resultant growing cement market.
Since the 2011 Libyan revolution and the end of Colonel Gadaffi's reign, the country has endured further political turmoil. Transfer to a National Transitional Council (NTC) in 2012 has gone some of the way to stabilising the country, but fundamendal economic and polical greivances remain.
Elections in July 2012 gave way to the formation of the General National Congress (NTG) in August 2012 although further problems were encountered in October 2012 when the prime-minister elect was suspended for failing to gain approval for his government.
Throughout the turmoil, international business dealings have become very difficult for Libya. Indeed, on 3 September 2013 it was reported that oil production was at a standstill as the government continued to fire-fight against various groups of militia. Oil and gas represents almost all of Libya's income. Without it, the economy is in a perillous position.
Above: Summary statistics for Libya in 2012.
Libya has eight cement plants with a total capacity of 9.7Mt/yr. Prior to the revolution, the cement industry of Libya was looking at a stable future based on a steady supply of large public works demanded by the Gadaffi regime. However, the country had approximately double the cement capacity that it required. Large projects were to be funded by oil revenues that had started to flow back into the country following the lifting of UN sactions in 2003.
The effect on GDP/capita of the removal of the sanctions can be seen in Figure 4, which also shows cement production. In 2011 there was a steep decline in production, with a 50% drop from 7.0Mt in 2010 to 3.5Mt in 2011. This was due to the revolution. Indeed cement plants close to Benghazi were commandeered by revolutionary forces during the uprising. With very little cement demand due to ongoing conflict, the Libyan cement industry is currently badly affected.
Estimates of actual production are hard to come by and production is almost certainly hampered by current political and economic conditions. Capacity utilisation is likely to be 15-25%.
A major player in the Libyan cement industry since the Gadaffi era is Libyan Cement Company (LCC), which is 90% owned by the Austrian Group Asamer and the Economic and Social Development Fund.
LCC has a total of six production lines at three sites in Benghazi, Hawari and Al-Fataiah, with a combined capacity of 3Mt/yr. This is almost as much as the USGS's estimated production for the whole of the country for 2011.
The other major player in the Libyan cement industry is Ahlia Cement Company, which has been in operation since 1965. It has existed in various forms, merging with Zliten Cement in 1988. It was transferred from public to private hands as part of a major privatisation drive in 2005. It has a total capacity of 8Mt/yr across four sites. Arab Union Contracting Company has a 1.4Mt/yr plant at Zliten.
The ageing Libyan cement industry, which even in the relative boom of the pre-revolution era, was only running at around 50% of installed capacity, currently has little problem supporting the country's cement demand. In light of this and current problems with disorder and oil production, there will be no opportunity (or indeed need) for Libyan cement plants to produce more cement or expand in the immediate future.
Reports from 2012 that suggested cement consumption rates as high as 0.8Mt/month (9.6Mt/yr)11 due to reconstruction efforts are not being realised. There is certainly no impetus for foreign multinational producers to establish bases in the country until current issues can be effectively resolved.
The 1952 Egyptian Revolution ended centuries of occupation by Roman, Ottoman and finally British rule. One of the most populous African nations, Egypt saw relative stability under the long dictatorship of Hosni Mubarak. His removal from power in the 2011 uprising and the subsequent removal of his successor Mohamed Morsi by similar means in 2013 has meant prolonged uncertainty. The interim President is Adly Mansour.
Egypt's cement production infrastructure has a long history, with the first plants commissioned in the early 20th Century. Plants at Alexandria (0.1Mt/yr and 0.15Mt/yr), Torah (0.16Mt/yr) and Helwan (0.15Mt/yr) were established under British colonial rule.
In 1956, the National Company for Cement in 1956 was formed to consolidate Egyptian cement assets. It produced 0.3Mt/yr of cement onwards from 1960.
New companies commissioned further plants in the 1980s but in the 1990s the Mubarak regime opted to privatise the sector. Sales and partial sales of Helwan Cement, Assiut Cement, Beni Suef Cement, Ameriya Cement and Torah Cement were carried out between 1995 and 2000.
Today, the multinationals with interests in Egypt include Mexico's Cemex, which owns Assiut Cement, Portugal's Cimpor, which operates Ameriya Cement, and Greece's Titan, which has interests in Alexandria Portland Cement and Beni Suef Cement.
France's Lafarge acquired the entire cement portfolio of the Egyptian group Orascom in December 2007 for a total of Euro8.8bn, with a further Euro1.55bn of associated debts. In Egypt, this came to a total of 10.2Mt/yr from Orascom's subsidiary Egyptian Cement Company, which is now known as Lafarge Cement Egypt (LCE).
The 10.6Mt/yr El Ain El Sokhna plant operated by LCE is the second largest in the world and has undergone major expansion in its short production life. It was established in 1998 as the first Egyptian-owned private cement plant.
Production began in April 1999 with the commissioning of the first kiln. This was joined in September 1999 by a second kiln. Kilns three and four were added in November 2000 and November 2001 respectively, with kiln five beginning production in June 2006, 18 months prior to the Lafarge deal. At the time of the deal, the plant easily covered a fifth of Egyptian demand.
Egypt's current social and political upheaval is causing large scale uncertainty. This has caused disruption in the construction sector and lowered demand for cement. The realities of the post-Mubarak era increasingly see cement producers paying far more for fuel amid flat or decreasing demand, with squeezed margins as a result. There was an 8% drop in cement demand between 2010 and 2011 to 45.2Mt/yr.
While a production figure for 2012 is hard to come by, Italcementi and Lafarge both alluded to problems in their Egyptian operations in 2012.12 Italcementi reported a loss in sales in its first half results for 2012 partly due to the Egyptian market, while Lafarge saw volumes fall by 11% in its second quarter in Egypt due to limited gas supplies.
In 2013 Titan, Italcementi and Lafarge have insisted that their situations have marginally improved in Egypt, whereas Cemex has reported a 10% decline in sales for the first half of the year.
Elsewhere, 2013 has so far brought a series of negative events to the Egyptian cement industry.12 To date 2013 has been punctuated by: fuel shortages at Suez Cement, a hostage drama at Alexandria Cement, Arabian Cement calling for the government to assist with the switch to non-traditional fuel sources, disruption at Misr Beni Suef Cement and the kidnap and murder of three cement plant workers in Sinai. The price of the heavy fuel oil mazut, commonly used in the pre-revolution days, has increased by a factor of 2.5 in the first half of 2013. On top of this the sector was accused of price-fixing by the former Morsi government in the early part of the year. Any investigation into this accusation must surely be on ice for the time being.
Given that margins are under attack from low demand and higher production costs, producers could be excused if they had lost their appetite for Egypt. However, ASEC Minya commissioned its 2Mt/yr plant at Minya in May 2013, producing its first cement in September 2013. Arabian Cement intends to increase its capacity in the country by way of a contract to operate and maintain two plants for Egyptian National Cement.
Does this suggest a brighter future for cement production in Egypt? Yes and no. Like in Libya, the government is arguably more interested in maintaining civil order than helping cement producers. Unless the political situation improves so that meaningful construction and development can resume, the situation is likely to remain stagnant.
In the event that cement demand does increase, Egypt has more than enough capacity to satisfy its own requirements. It is new plants like ASEC Minya, with inherent efficiency advantages, that will fare best in this scenario. In the longer term Egypt has high potential for those producers willing to take the risks involved.
i: GDP, population and area data from the CIA World Factbook website.
ii: GDP/capita data from World Bank Data Indicators website.
iii: Cement production data from USGS website.
iv: Cement industry details taken from 'Global Cement Directory 2013,' PRo Publications International Ltd., October 2012, and work conducted towards the publication of 'Global Cement Directory 2014,' Pro Global Media Ltd., in progress.
v: Cement company history from company websites and parent companies.
vi: Sources 1 - 12 to be published soon