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Al-Ahram Weekly 5 - 11 August 1999 Issue No. 441 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 5 - 11 August 1999 Issue No. 441
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Focus Interview Features Travel Living Sports Time Out Chronicles People Cartoons Letters Investing in cement
By Mona El- FiqiA seminar attended by cement producers, experts and businessmen interested in the industry heard Mokhtar Khattab, advisor to Public Enterprise Minister Atef Ebeid, say that shares in the Alexandria and Assiut Cement Companies will soon be offered for sale. But the government will not sell shares in the two companies at the same time because this might cause a drop in their share value.
The government plans to continue privatising all cement companies, Khattab said. "This decision arises from the government's confidence that the private sector will succeed in managing the cement sector." Government investments should be directed to other sectors such as human development, he added.
Sponsored by the Egyptian Capital Market Association, a private NGO, the seminar was entitled "The Future of the Cement Industry in Egypt."
There are nine cement companies in Egypt, eight of which are owned by the public sector. These eight are among the 314 firms originally slated for divestiture under the government's privatisation programme.
Majority shares in the Torah and Al-Amiriya cement companies have already been sold, while 21 per cent of Alexandria Cement Company's shares and 33 per cent of Torah's have been offered for public subscription, according to the records of the public business sector
The most recent sale in the sector involved the Beni Suef Cement Company which was purchased by an anchor investor, Lafarge of France. Among the problems which cement producers face is a dispute which has emerged over the possible relocation of cement factories far from residential areas to reduce environmental pollution. However, Khattab said that cement factories will not be relocated because the costs would be exorbitant. There are technologies which can be used to deal with the negative impact of the emissions from cement factories on the environment instead of resorting to relocating them, he added.
A supply-demand gap has emerged in the industry in recent years which is one of the major problems facing cement producers. The cause is two-fold: infrastructure demands for the mega-projects being undertaken by the government as well as growth in construction activities in the private sector.
A supply-demand gap is one of the problems facing the local cement industry
This shortfall, which is currently covered by cement imports, increased from 0.4 million tons in 1994 to 4 million tons in 1998.
It did not result from a decline in local production but was driven by rising demand. Total production of cement equalled 21 million tons in 1998, while consumption reached 25 million tons last year and is expected to hit 26.4 million tons this year.
The Toshka development plan and the government's ongoing urbanisation projects are expected to significantly increase demand for cement in the coming decade.
Although some experts say that cement imports have not negatively affected local producers, representatives of the producing companies do not agree.
Alaa El-Sisi, a researcher from the Commercial International Brokerage Company, maintains that the high customs duties imposed on imported cement protect local producers. However, producers say that there are both negative and positive aspects to the increasing amount of imported cement. They believe that while cement imports close the supply-demand gap in the Egyptian market, they open the door to a highly price-competitive alternative to local cement production.
Hatem Khalil, deputy chairman of Al-Suez Cement Company, said that at present all local production can be easily sold, but the low price of imported cement, which averages LE50 per ton compared to LE80 per ton for the local product, may lead to the dumping of cheap imports in the market.
The cement industry is one of the most profitable and flourishing in Egypt, and this is why local and foreign investors like to set up new cement companies or buy shares in established companies offered for sale. The Egyptian Company for Cement is the first of a new breed of private cement companies. It started operating this year and production has already reached 4.1 million tons.
Mona Ibrahim, a researcher in the Prime Investment Company, said the cement industry represents a potential growth opportunity for investors, and more international players are entering the Egyptian market.
The major competitive advantage that the Egyptian cement industry enjoys is its low per-ton operating cost which allows companies to enjoy high profit margins compared to cement producers in other countries.
