Egypt proposes production cuts to ease cement glut - sources

Vicat SA

10/05/2021 11:59

By Patrick Werr
    CAIRO, May 10 (Reuters) - The Egyptian government has
proposed that cement makers cut production by a baseline of 10%
to shore up finances ravaged by an expanding market glut, two
cement executives and a senior industry source said. 
    Egyptian cement capacity has risen to an annual 85 million
to 87 million tonnes in the last three years following the
inauguration of the 13 million tonne-per-annum Beni Seuf plant
owned by the military, even as sales fell to less than half that
level, according to the executives.  urn:newsml:reuters.com:*:nL8N28I0BJ
    The cement sector, where several international firms
established a footing, is seen as an indicator of Egypt's
openness to outside investment. 
    The two executives - who spoke on condition of anonymity -
said the proposed cuts seemed unfair on foreign-owned firms like
their own with a longer presence in Egypt.
    Egypt's Ministry of Trade and Industry did not respond to a
request for comment. 
    Under the formula proposed last month, each cement maker
would cut production by a base amount of 10.52%. They would cut
an additional 3.71% for each production line and 0.65% for each
year they have been in operation, said one executive. 
    That would amount to a cut of at least 14%, and possibly
more than double that for older and bigger plants, the person
said. 
    It is unclear if the beginning of operation would be based
on the age of the plant, the date it was privatised or when
current investors took over, the executive added. 
    "It's very welcome by the industry that there is some sort
of intervention by the government," said the second executive. 
    But he added: "We don't think (the formula) is particularly
fair, it's biased towards some local players at the moment." 
    The executives said cement makers have asked the government
for clarifications and were waiting to hear back.
    Foreign cement firms, including Germany's HeidelbergCement
 HEIG.DE , France's Vicat  VCTP.PA , Switzerland's LafargeHolcim
 LHN.S , Greece's Titan Cement  TITC.BR  and Mexico's CEMEX
 CEMEXCPO.MX , invested heavily in Egypt after a privatisation
drive that began in the 1990s. Local players set up their own
plants later. 
    Another 2-million-tonne plant will come on stream this year
in Sohag, 400 km south of Cairo, its CEO and member of
parliament Ahmed Abu Hashima told local media in September. 
    The plant, owned by Egyptian Cement Co., began trial
production over the last few weeks and is due to start shipping
soon, cement sources in Sohag said. Company officials did not
respond to queries.
    Cement companies complained of overproduction even before
the Beni Suef plant was built. 
    Annual cement sales fell to 41.7 million tonnes in 2020 from
43.8 million tonnes in 2019, according to central bank
statistics. It stood at 49.5 million tonnes in 2017, the last
year before Beni Suef went online. Sales last year were hurt by
the coronavirus pandemic. 

 (Additional reporting by Ehab Farouk
Editing by Aidan Lewis and Gabriela Baczynska)
 ((patrick.werr@thomsonreuters.com;))