Egypt uprising disrupts cement industry

Egypt uprising disrupts cement industry
04 February 2011

Mounting political turbulence in Egypt has resulted in a number of local cement producers temporarily closing production lines and evacuating expatriates as demand wanes and future prospects in the country remain uncertain.

Over a week of protests have left Egypt in turmoil as anti-demonstrators across the country demand the immediate resignation of President Hosni Mubarak. The situation has further worsened since Wednesday following violent clashes in the capital Cairo between supporters and opponents of the Egyptian president.

Prior to the civil unrest the Egyptian cement industry was on a strong footing having expanded vigorously over the past five years, fuelled by healthy building and real estate activity. During recent uncertain global economic times, the local construction industry has continued to grow despite stalling elsewhere in the region.

The domestic cement industry consists of 15 companies, of which nine are controlled by six multinationals. Concerned about the unrest, Lafarge has halted production and organised the return of approximately 30 of its Cairo-based expatriates and their families involving about a hundred people in all. “Production activities are temporarily halted,” a spokeswoman said, adding that the company stands ready to start up production as soon as conditions in the country allow. Lafarge entered the local market in 2007 through the acquisition of Orascom Construction Industries’ cement business and has six production sites, six quarries and 62 ready-mix plants.

Similarly, Titan, which has two cement plants in Beni Suef and Alexandria, has limited output to the absolute necessary as it suspends distribution. Italcementi, meanwhile, which operates through its Suez Cement subsidiary, has also temporarily halted production for safety reasons. The company has five cement plants as well as 20 concrete plants in Egypt. Portuguese major Cimpor has also suspended production and repatriated its staff.

The current social turmoil has proven to be a negative catalyst for shares. Titan fell 2.1% to EUR15.78 on Monday in Athens, valuing the business at EUR1.28bn. Shares of Lafarge fell 2.5% to EUR42.92 on the same day while Italcementi was down 3.7% to EUR5.9. BPI, meanwhile, has reduced its share price target for Cimpor to EUR5.30 from EUR 5.50. European cement makers with a production base in Egypt have also been reported to be underperforming the STOXX Europe 600 Construction & Materials index. "The concern is that the long-term ramifications of the crisis will impact the operations and supply of the plants of companies in the region, such as Lafarge," Royal Bank of Scotland analyst John Messenger said.

In terms of local cement producers, Misr Cement (Qena) told CemNet on Monday its factory is open and production is continuing. However, an official of Safe Trading Company of Egypt, a cement exporter and agent for cement producers, said that the company’s business activities were on hold and export/dispatches of cement have been disrupted.

Although no clear picture has yet emerged as to when the unrest will end, local producers are monitoring the situation closely and remain poised to resume production as soon as calm is restored. While Egyptian cement demand recorded a slower YoY growth of 3.7% for the first nine months of 2010 to reach 45.5Mt, the country’s immense infrastructure and housing needs, coupled with its large population base, provide the fundamentals for strong demand. In terms of supply, total domestic capacity reached 50.1Mt in 2010 and seven new licences amounting to 10.5Mta have been approved
Published under Cement News