Egypt: Suez Cement Group has reported that a much improved energy availability, driven by coal utilisation and a more steady supply of the heavy fuel oil known as mazut, has allowed the Egyptian cement industry to boost its production by 29% year-on-year in the third quarter of 2015 and 23% in the first nine months of 2015.
During the third quarter of 2015, market demand grew by 2.1%, while cement demand grew by 1.6% in the first nine months of 2015. Combined with a steep reduction in exports, this resulted in a marked oversupply of cement products in the domestic market, causing prices to decline. This trend was exacerbated in the third quarter of 2015 with a market demand slowed down by an unfavourable calendar and strong production activity in contrast with summer 2014, when energy supply was at its lowest. Simultaneously, traditional energy prices grew by around 30% with the implementation by the government of the subsidy lifting programme. Suez Cement was able to maintain its market leadership, but saw its sales volumes decline slightly as it tried to defend its pricing. Exports to regional markets, such as Libya and Yemen, remained limited because of political and economic instability.
Suez Cement reported an 18% decrease in revenues for the third quarter of 2015 and a 12% fall for the first nine months of the year. The company continued to implement its action plans to improve internal efficiencies and modify its energy mix, with two plants now fully converted to use coal and waste-derived fuel. The resulting cost improvement was insufficient to offset the impact from pricing, energy price and cost of labour increases.
Suez Cement expects Egypt's supply-demand imbalance and lower cement prices to remain negative for the rest of 2015. However, it foresees improved cement demand and rebounding prices in 2016. Egypt will move forward with the implementation of several large national projects under the auspices of government stimulation initiatives designed to boost demand for cement across the country.
Suez Cement is currently preparing for the implementation of coal conversion projects at the Helwan and Tourah plants in the next two years. The company's energy diversification programme is focused on increasing the use of waste-derived fuels, petroleum coke, coal and renewable energy in order to prevent fluctuating natural gas and mazut prices from negatively impacting the company's bottom line. Suez Cement anticipates that its energy programme will continue to improve its manufacturing capacity and decrease operational and production overheads.