Egyptian demand seen rising at CAGR of 5.5% to 2015

Egyptian demand seen rising at CAGR of 5.5% to 2015
21 June 2011

Cement consumption in Egypt is set to grow at a Compound Annual Growth Rate (CAGR) of 5.5 per cent between 2010-15 according to forecasts by Cairo Financial Holdings (CFH).

Despite the current disruption in economic activity and its negative consequences on the cement sector on the short-term, CFH believe that Egypt’s cement sector long-term outlook is positive, driven by the massive investments required in the field of infrastructure and society development projects, where the country remains underdeveloped.

Post the revolution, the construction sector was negatively affected by the disruption of economic activity. However, CFH believe that this disruption will be temporary until the country  witnesses stabilisation on the political front, which is expected to happen when new the parliament and president are elected by the end of 2011.

Monthly local cement consumption figures signal that local demand started to recover in April 2011, as local cement demand recorded a growth of 4.0% on a monthly nasis, compared to April 2010, leading to a cumulative consumption decline of 5.1% for the period from Jan-Apr 2011, relative to -11.1% and -8.2% for the periods of Jan-Feb & Jan-Mar 2011, respectively.

CFH believe that the government will continue to target developing infrastructure projects and low income housing. In April 2011, the government announced that it will build 1mn housing units for low income people, through building 200,000 housing units annually, over the next five years. In addition, the government approved the “development corridor project”, which entails building a parallel community to the River Nile in the Western Desert, with an estimated initial cost of US$24bn. Once this project entered into the application, it will give a very strong boost to the construction and building materials sectors.

In June 2011 the government announced that it will offer 15 mega infrastructure projects including airports, new metro lines, roads, sanitation, schools and hospital under PPP scheme that are expected to attract investments amounting to EGP100bn (US$16.8bn). Furthermore, the state’s budget for FY2011/12, which was approved on 1 June 2011, allocated EGP10bn to the national housing project.

Although CFH believe that the construction sector is expected to experience some slowdown over the short-term, the sector is forecasted to keep a reasonable growth momentum over the long-term. The government’s plan to boost investments in infrastructure, as well as low income housing and industrial projects, besides prioritizing the improvement of under-developed areas in Egypt will act as a cushion for the activity in the construction sector, providing reasonable support for the building materials sector, including cement, CFH notes.
Published under Cement News