Displaying items by tag: Ethiopia

Ethiopia: Ethiopia has produced 12Mt of cement, double its domestic demand, in the fiscal year that ended on 7 July 2013, according to a report released by Ministry of Industry (MoI). The country's current domestic demand for cement is estimated to be around 5.4Mt/yr.

The government expected a significant rise in cement demand in its Growth & Transformation Plan (GTP) that plans for per capita consumption of cement to increase from 35kg to 300kg. It had predicted that the demand would grow to 27Mt/yr, exceeding the 12Mt/yr cement production capacity of the country's 18 plants in the 2014 – 2015 fiscal year.

Ethiopia: Tamiru Wondimagegn has been appointed as board chairman of Habesha Cement. He is a prominent lawyer and board member of Habesha Cement. He succeeds Gizaw Teklemariam, who previously worked in the oldest state owned cement factory, Mugher.

Habesha held elections for its board in late January 2013, following a reduction in board places from 12 to nine. The Ethiopian cement producer has also given three board of directors seats to two South African companies, International Development Corporation and Pretoria Portland Cement, which are credited for bringing in 49% equity to Habesha.

Nigeria: German vertical roller mill (VRM) producer Loesche GmbH has been awarded a contract for five new VRMs from China's Sinoma International Engineering, which is building a two kiln extension to the existing Dangote Cement Ibese plant. Loesche previously delivered equipment for the first and second lines at the same plant.

The five VRMs to be supplied are two 450t/hr Loesche Mill Type LM69.9 mills for raw material and three 310t/hr cement LM 63.3+3C cement mills. As with previous work at Ibese, the high moisture of the material of up to 20%, the sticky nature of the raw material and the low grindability of the raw material represent special challenges for the project.

In addition to the mills and the mill motors, Loesche will deliver metal detectors and hopper discharge feeders. The supply of the equipment will be split between Loesche, which is supplying key parts, and a Chinese-manufactured portion arranged by Sinoma International under supervision of Loesche. Delivery is scheduled at the end of 2013.

Ethiopia: Sinoma has also announced that it has contracted Loesche as the sole supplier of grinding technology for the construction of the Menagasha grinding plant, which is being constructed by Dangote. Delivery will be in early 2014.

Four Loesche mills will be included in the process; a 450t/hr LM 69.6 for raw material grinding, a 50t/hr LM 28.3D for coal grinding and two LM53.3+3C mills will be used for grinding clinker additives such as gypsum, limestone and pumice.

In addition to the mills and the mill motors, Loesche will deliver metal detectors and mill rotary feeders. The supply is a split-up of Loesche key parts and a Chinese manufactured portion arranged by Sinoma International under supervision of Loesche.

Both the plant elevation of 2600m above sea level and the very poor grindability of the cement raw material represents a special challenge for the layout of the grinding equipment in this case.

Ethiopia: The Development Bank of Ethiopia has withdrawn from a US$82.8m loan agreement made with Habesha Cement. In September 2011 the bank approved the loan which was expected to cover over 70% of the financing of the proposed cement factory.

The bank withdrew from the arrangement on the basis of its inability to disburse money at this time. In addition, it also pulled out of the loan commitments to five other companies citing similar reasons. According to sources, the bank has pledged to help the companies in their search for foreign financing.

In July 2012 PPC (Pretoria Portland Cement) and South Africa's Industrial Development Corporation (SAIDC) paid US$21m for nearly half of Habesha Cement. PPC acquired 27% of the Ethiopian cement factory by paying US$12m in cash and the state owned SAIDC paid US$9m for an additional 20%.

The outgoing chief executive of PPC (Portland Pretoria Cement) officer, Paul Stuiver, summed up the dilemma facing cement producers on the east coast of Africa. Building near the coast leaves you vulnerable to imports.

In a recent interview with the South African business weekly, 'Financial Mail', Stuiver said that imports are not a threat to African expansion, provided that a facility is not built within 200km of a port. Exactly the same issue was raised by Yves De Moor in his column in the November 2012 issue of Global Cement Magazine.

Countries along Africa's east coast receive imports, but Stuiver said that Africa's high logistics costs mean the prices increase steeply as the cement is transported inland. He commented that the markets in Mozambique and KwaZulu Natal in South Africa were especially vulnerable and that most imports to South Africa come through Durban. Unsurprisingly both of PPC's big recent investments have been in landlocked countries, Zimbabwe and Ethiopia respectively. In July 2012 it also tried to invest in CINAT, the Democratic Republic of Congo's state-owned cement producer.

The import issue to South Africa reignited last week when the South African National Regulator for Compulsory Specifications (NRCS) confirmed that it had confiscated 'sub-standard' cement imported from Vietnam. As we covered in August 2012 in this column this follows a row in July 2012 about whether cement from Pakistan's Lucky Cement was complying with South African standards.

Although standards still lead the argument, more honesty has emerged with the use of the word 'dumping' in the complaints. Stuiver explained that "...the price of cement from Pakistan, India and Vietnam is low because electricity, fuel and transport rates are subsidised." Whilst PPC can report that its revenue has risen by 9% to US$837m for the first nine months of 2012, complaints against foreign imports seem overly protective. In 2009 PPC confirmed the existence of a cartel in the country. PPC has even gone to the Advertising Standards Authority to stop imports with elephants on their bags!

With reports that Nigerian producer Dangote is building a new US$389m plant in South Africa, thoughts turn to what will happen once South Africa becomes 'self-sufficient' in cement, like Nigeria which has proudly announced this recently. Giant infrastructure projects are one way to use all that excess cement and this is what Lafarge WAPCO has been asking the Nigerian government to do recently, in a road building drive. Better transport links in South Africa would wreck Stuiver's maxim about not building near a port.

Two solutions from this week's news might appeal to the industry on the south and east coasts of Africa. The first is to use inventive export barriers just like the Bureau of Indian Standards have imposed to slow down exports from Pakistan. The second is to persuade importers to do what a North Korean ship reportedly did with its consignment of cement this week off the coast of Somalia: dump it in the sea.

However bad the multinational cement financial reports get as they tighten their operations remember that it could be worse. For example, they could face the challenges the East African Portland Cement Company (EAPCC) has confronted over the last year. Reuters broke the news this week that EAPCC had widened its loss to US$9.96m due to poor sales, a major plant breakdown and labour unrest. All of this occurred in a construction economy demanding ever more cement.

EAPCC has seemed surrounded by controversy over the last year starting with a conflict of interest issue raised over a change in clinker supply in December 2011. This then led to the removal of the company's directors by the Kenyan government, which in turn led to a strike. In the chaos a worker was shot and wounded. On top of that the report reveals that there was a 'major' breakdown in one of the plant's kilns. It's a wonder that EAPCC didn't make a greater loss in the 2011-2012 year.

Demand for cement in Kenya and in the other countries in the east African region is growing. Data from the Kenya National Bureau of Statistics in December 2011 showed that cement consumption in Kenya rose by 12% in the nine months to September 2011. As reported last week in GCW72, ARM Cement (formerly known as Athi River Mining Ltd) reported a net profit of US$9.71m for the first nine months of 2012. This marks a 328% growth in profit compared to the same period in 2011 when it made US$2.26m. Meanwhile this week it was announced that Ethiopia is about to open its second cement plant in the town of Dire Dawa. More plants are on the way. Over in Tanzania, the Tanzania Investment Centre (TIC) announced that the country's cement deficit surpassed 1Mt since 2011.

As has happened elsewhere in Africa, notably in Nigeria and South Africa, local producers are pushing hard to restrict foreign imports as they grow their own capacity. In September 2012 the East Africa Cement Producers Association (EACPA) made warnings on the issue. The chairman of EACPA at the time was none other than the managing director of the EAPCC. In addition potential investors should take note that Kenya will hold its next general election in March 2013. Over 1000 people died in the protests following the 2007 election as well as the displacement of over 500,000 people.

Given this growth in protectionism, international producers who want to expand are being forced to seek riskier territories. Pakistan's Lucky Cement, a major importer of cement to Africa, is doing exactly this. It announced this week that it is entering into joint ventures in plants in DR Congo and Iraq. However these projects perform, Lucky Cement must be praying that they don't end up looking like the last year that EAPCC has endured.

Ethiopia: Mugher Cement Enterprise is considering proposals from two Chinese suppliers for a turnkey project to convert its current heavy furnace oil (HFO) clinker burning system to a coal-fired system. Mekonnen Zergaw, CEO of the state-owned Mugher, declining to disclose the names of the companies. He said that five companies had participated in the bid, of which one has been disqualified at the beginning while two companies did not pass the technical evaluation.

This is the second time Mugher has accepted tenders for the upgrade. Originally Mugher awarded a US$28m contract to Chinese firm Hefei Cement Research Design Institute (HCRDI) that built the same project for the EFFORT Messobo plant. "The company increased the bid by around US$11m after we had already awarded it," said Zergaw.

Mugher plans to complete the coal-fired furnace by the 2013-2014 fiscal year and its demand for coal is estimated to be 693Mt/yr. However, Mugher is still waiting for the approval of a US$33.2m loan request from the Commercial Bank of Ethiopia. The Ethiopian government instructed cement factories in 2010 to shift from HFO to other alternative sources of energy in order to reduce foreign currency spending.

Ethiopia: National Cement SC plans to complete upgrades worth US$99.7m by the start of 2013 according to the company's chief executive, Busa Assefa.

"We will start clinker trial production in October 2012 and cement trial production in November 2012," said Busa. He added that the trial production phase at the compnay's new plant near Bajatu, Kebele, will begin at a 60% clinker and a 70% cement production rate, to become fully operational by the start of 2013.

National Cement SC was formed from a merger between Ethiopia's first cement plant, Dire Dawa, and the National Cement plant that is currently under construction. Dire Dawa has a capacity of 60,000t/yr with further upgrades scheduled. The new National Cement plant will have a capacity of up to 4500t/day. It is being built on a 40ha location in Bajatu, Kebele, within 3km of Dire Dawa.

National Cement SC's upgrades will increase Ethiopia's national capacity, from 18 operational plants, by 1.3Mt to 12.46Mt/yr. The company expects to rely on the eastern Ethiopian market and exports to Djibouti and Somalia. In addition, the city of Dire Dawa has licensed four cement factories with a combined capital of US$277m, of which three are under construction.

Ethiopia: In what would be its maiden overseas venture, India's Birla Corp has announced plans to set up a cement plant in Ethiopia. The MP Birla group company has recently formed a wholly-owned subsidiary, Birla CorpCement Manufacturing plc, in Ethiopia to establish a plant.

"We plan to go there for exploration of limestone to set up a cement plant," said a Birla Corp official. "We would also explore opportunities to set up power plants there."

While Ethiopia is economically poor it is endowed with significant limestone deposits. Cement companies have started eyeing projects in the country after the government started facilitating the import of coal. The country currently imports cement because local demand far outstrips supply and acute power shortages keep new investments away.

This is not the first time that Birla Corp has tried to enter the Ethiopian cement market. In 2010 it made a contract bid for the construction of a cement plant at Habesha but lost out to Chinese competitors. Chinese mining companies have taken up extensive limestone mining contracts in Ethiopia in recent years, firming up long-term off-take contracts.

Ethiopia: The Development Bank of Ethiopia (DBE) has approved a loan of USD90m for Habesha Cement. This represents 70% of the estimated USD120m that the company requires to build the first cement plant to be owned by an Ethiopian company.

Habesha Cement secured the first 30% by selling shares up until 2009 and from a USD79m deal with Northern Heavy Machinery Industries (NHI) Group in October 2010 for the provision of a turnkey cement plant. Habesha Cement was hoping to secure the rest from DBE in 2010.

However the devaluation the Ethiopian Birr by 20% in August 2010 prevented the loan being secured. The board was forced to recommend floating more shares at its second general assembly. Now Habesha Cement has raised a total of USD32m, which is still short by 8.4% of the 30% equity it needs to receive the loan.

"We are confident that we will raise the remaining funds as there are still lots of people asking to buy our shares," said Mesfin Abi, general manager of Habesha Cement. "Our worry was getting the 70% loan approved from the DBE."

The construction of the cement factory, which is to be located in Holeta, west of the capital in Oromia regional state, is to start once NHI is paid 10% (USD7.9m) of the agreed-upon amount, according to the agreement signed in 2010. The advance payment is to be paid in US dollars.

As Habesha Cement does not have access to foreign currency, it has to wait for DBE to grant it the loan so that the bank can make the payment in dollars on its behalf. Once the advance has been paid, NHI is expected to finish the construction of the factory within 20 months according to the agreement.

Habesha Cement expects to produce 85% and 95% in its first two years of production and 1.2Mt at full capacity in its third year, according to its prospectus. Once it starts to produce at full capacity, Habesha Cement will be the third largest producer of cement in Ethiopia next to Mugher Cement and Messebo Cement, which produce 1.9Mt/yr and 1.7Mt/yr respectively.

The total production of cement in the country is expected to reach 27Mt over the five years to 2016, according to the government's draft economic plan. There are currently 11 companies with a combined production of 5.4Mt/yr.