Ethiopia: Chinese producers report tough market conditions

Ethiopia: Chinese producers report tough market conditions
Published: 20 October 2014

Tagged Under: Somalia Ethiopia 

Ethiopia’s sudden slump in cement demand has left an oversupply situation with Chinese cement producers in the country reporting toughening market conditions.

There is increased pressure on some companies to look at surrounding markets to meet their targets. Many local cement producers are having to look at exporting their output, for instance, to Somalia. Meanwhile, domestic cement prices have fallen from between ETN3000/t to 4000/t (US$150 to US$200/t) in 2011 to the current ETB2500.

Despite the fall in demand, Ethiopia still stands third after Nigeria and South Africa as sub-Saharan Africa's leading cement producer. But according to the latest figures from Ecobank in Nigeria, Ethiopia's cement output has reached just 12.6Mt this year, well short of original government targets.

Zhong Shun Cement Manufacturing says that when it first started production in July 2010 the country was suffering from a shortage of domestically-produced cement, as the second-most populous country in Africa continued to enjoy rapid economic growth. Reflecting an investment of US$10m, Zhong Shun's 0.25Mta plant has relied on clinker imports, but now only produces to order.

"The Ethiopian market no longer suffers from a shortage of supply of domestically-produced cement,” said Wei Zhijin, Zhong Shun's deputy general manager in Ethiopia. "In fact there are too many new cement projects, and this has had a serious impact on the market, which we expect to last for years to come.
Zhong Shun's output is expected to reach 170,000t this year," Zhijin says. The company's combined annual cement capacity, along with its other plant, East Cement, is more than 700,000t, but that is considered small compared with many others, he says.

The country's five-year plan (2010-14), known as the Growth and Transformation Plan, had predicted demand would reach 27Mt by next year, but Wei says that prediction looks grossly exaggerated, and demand has failed to keep up with what has been fast-growing supply.