Moroccan cement firms face new free trade challenge

Moroccan cement firms, backed by European majors, will soon face tougher competition from imports which could endanger one of the Casablanca bourse’s heavyweight sectors, industry officials and analysts say.

The implementation in January 2005 of free trade deals with Egypt, and later with Turkey, are likely to drastically cut profit margins for local firms affiliated to, or controlled by the likes of Lafarge and Holcim.

Cement in Morocco sells at $80/t, more than double the price in Egypt and Turkey and slightly above the prices prevailing in Spain and Greece.  Such a price gap is due to high inflation rates and repeated devaluations in Egypt and Turkey, said a cement firm manager.

A senior official of cement group APC said rivals enjoy greater flexibility with their fully liberalised monetary markets, unlike Morocco.

"Energy, which accounts for 40 per cent of cement prices, is 50 per cent cheaper in Egypt," he said.

Moreover Egypt has an annual production surplus equalling Moroccan cement firms’ total annual output, so it could easily supply the whole Moroccan market with 10Mt of cheaper cement.

However, some analysts say Moroccan cement firms are well-prepared for free trade with Egypt and Turkey while others say the government ought to help them by reducing the price of energy.