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Keep cement supply cuts in place, industry tells regulators: Cement factories have filed a request with the Egyptian Competition Authority (ECA) to extend a quota system that enforces cement production cuts, according to several industry sources Enterprise spoke with. The quota system, which is set to expire on23 July, aims to buoy cement prices as producers weather a decline in demand and a prolonged supply glut. The news was first picked up by Al Borsa.
Refresher: The ECA in July 2021 introduced a one-year quota system at the request of local companies to put an end to a chronic supply glut that had left many in the industry on the brink of collapse. The system mandated supply cuts of over 10% for the industry, and was extendedfor another year in July 2022 in response to a new wave of requests.
There’s a steep decline in demand: Local demand for cement dropped around 9% y-o-y in 1H 2023, Arabian Cement CEO Sergio Alcantarilla and Lafarge Egypt Commercial, Marketing and Logistics Director Ahmed Abdo told Enterprise. “We would have to go back to 2008 to see lower cement demand,” Alcantarilla said, adding that even 2020 — which saw the worst of the covid-19 pandemic — didn’t see such low levels of demand. Meanwhile, cement prices, measured in USD per ton, “are still 40% below the prices of November 2016, just before the first big devaluation of the EGP,” he said.
Who’s lobbying for the extension? “At least a vast majority of cement factories have asked for another extension of the quota system,” Alcantarilla told us.
The ask: Lafarge Egypt has requested the ECA to extend the quota system for two more years, Abdo told us. Arabian Cement, meanwhile, has asked for a one-year extension, in addition to a reduction in its allotted quota of more than 10% but less than 20%.
A crucial lifeline: If the quota system doesn’t get an extension, factories would be forced to halt operations as they did in 2021, Alcantarilla said, adding that only some would be able to continue operations albeit with hefty losses. The end to the cuts would also “mean a few USD hundreds of mns less income into the country” as exports of cement and clinker would quickly dwindle, he added.
