Egypt cement prices down as demand falls

Egypt cement prices down as demand falls
Published: 21 September 2011

Mirroring the economic slowdown in Egypt, cement prices have fallen by around 30 per cent, traders say. Cement plunged to EGP425 (US$71) this month from an average EGP700/t compared to September 2010, one trader said.

While analysts attribute the decline in prices to fundamental factors – supply and demand – traders blame sector protests and deteriorating security conditions.

"The construction sector has taken a serious blow, public and private investments are on hold. The property market is also in a slump. The mood on the market is not good," Reda Hassan, Chairman of Global Trading for Building Materials, told the Egyptian Mail in an interview.

"Demand is in decline, which is a bad sign. When the construction sector recovers, the whole economy also picks up. There is a strong correlation," Hassan said.

Egypt’’s largest listed cement maker Suez Cement and its subsidiary Torah Cement stated that their first-half (H1) net profit declined by 37 and 12 per cent respectively. Sinai Cement’s H1 net profit dropped by 27 per cent, according to the Egyptian Exchange.

“As a trader, my profit margin will be lower than usual. Producers’, gains have been affected. But it is an open market and no one wins all the time,” he noted.

According to Ahmed el-Zeiny, the head of the building material department of the Cairo Chamber of Commerce, production has plunged by 50 per cent over the past months.

"Cement output slowed to 1.8Mt in August from a monthly average of 4Mt," el-Zeiny said.

"The cement market is in a bad state. After deducting LE60 from the price, the revenue amounts to LE395 per tonne. This very low price incurred losses of LE18 million over the past two months," said Osman Hammad, the Chairman of the National Company for Cement, adding that his plant cut its output to 4000tpd from 12,000tpd.

Despite the slump, the Industrial Development Authority (IDA) has unveiled plans to offer 12 new cement licences by mid-October.

"The authority aims to increase Egypt’’s output by 18Mt. Each licence will add 1.5Mt," Ismail el-Nagdy, IDA’’s chairman, was quoted by local media as saying last week.

The need to boost output stems from the need to increase housing and development due to population growth, analysts say.

The United Nations forecast Egypt’’s population to reach 100 million by 2020. By 2050, the population could reach 140-155 million, according to Egypt’’s Supreme Council for Urban Planning and Development.

Repercussions of the political unrest have reduced growth in the North African country in the third quarter of the fiscal year (FY) 2010/2011 to a negative 4.2 per cent, according to official data.