The average price of a tonne of locally produced cement was up from an average of LE500 last month to LE750 this week in local markets. While traders accused producers of raising prices without reasonable justification, the producers blamed the government for not being able to provide them with the energy they need, this having led to a reduction in the amount of cement on the market. In an attempt to overcome the energy shortages, the government is currently investigating greater provision of natural gas, though experts believe it is time for the cement industry to switch to an alternative energy source such as coal. The cement producers have blamed the government for not meeting its responsibility to provide the factories with the power they need over the past two months, leading to a 50 per cent cut in production. Medhat Estafanous, head of the Cement Industry Division at the Federation of Egyptian Industries, told the Weekly that the government was incapable of providing the cement producers with the natural gas they needed to operate factories at full capacity. Estafanous said the gas supply had been cut over recent months, done on purpose, he claimed, in order to hit the industry. “As a result, last month the factories were obliged to halt 50 per cent of the cement production lines despite the potential domestic demand due to limited energy availability,” he explained. Estafanous warned that cement prices could be expected to see more increases during the next few weeks. Moreover, “the cement factories are likely to close down within two months if their energy needs are not covered,” he added. He criticised the government for “monopolising energy production and distribution and selling natural gas to the cement factories at high prices compared to what happens in other countries. We pay US$6 per million BTU, while in other countries such as Turkey the gas is sold at US$2.7 per BTU.” However, Ahmed Al-Zeni, head of the Building Materials Division at the Cairo Chamber of Commerce, accused the cement companies of selling cement at higher prices than the international price. “The government should intervene and oblige the factories to reduce their prices. It is unjustifiable to raise prices by LE200 per tonne in two weeks while the factories have the advantage of a partially subsidised energy price. The cement factories are selling a tonne of cement at LE750, which is equivalent to $100, when it is US$60 per tonne in the international markets,” Al-Zeni said. In order to protect consumers, Al-Zeni said the government should set the international price as the ceiling price for locally produced cement. “Closure should be the penalty for factories that violate this price and sell their products at higher prices,” he said. In response to the hikes in the cement prices, the Chamber has written to the ministry of industry and the Egyptian Competition Authority accusing the cement factories of fixing the market and establishing a harmful monopoly. The Chamber's letter included documents showing that the factories had conspired to raise prices and obliging the government to provide them with natural gas at the subsidised price. Al-Zeni said that it was unfair for the factories both to benefit from subsidised energy prices and to sell their products at higher price than those on the international market. Cement factories in other countries did not benefit from subsidised prices, he said. “The government made a mistake when it continued to provide the cement factories with subsidised energy after selling the public-sector factories to foreign companies. Subsidies should only be given to low-income citizens, particularly at a time when the government is facing a shortage in providing energy,” Al-Zeni added. The cement industry consumes nine per cent of the total amount of natural gas produced in Egypt, coming in third place after the electricity and fertiliser sectors. Since the country is facing a shortage of natural gas, experts say that it is now time for the cement industry to switch to coal. Mohammed Shoeib, former chairman of the Egyptian Holding Company for Natural Gases (EGAS), said that the first step should be taken by the new government headed by Ibrahim Mehleb, who should inform the public of the real state of the country's energy situation. Shoeib said that Egypt's natural gas production had been decreasing for the past few years because foreign companies had not started new projects as the government had delayed their payments. As a result, natural gas availability has not been able to meet electricity and factory needs. The ministry of petroleum has also announced that natural gas is now used excessively to generate electricity at power stations due to a shortage of mazut. All this has led to supply problems of natural gas to the cement factories. To overcome the problem, Shoeib told the Weekly that Egypt should diversify its sources of energy and use wind and solar energy instead. Coal could be a good alternative to natural gas for cement making, he said. The cement factories could use coal for 80 per cent of their total energy needs and get the remaining 20 per cent from power generated from agricultural and solid waste treatment, he added. However, the ministry of environment decided this week to halt the switch of some cement companies to mazut for environmental reasons. According to Shoeib, the ministry should also now announce that coal will be used to fuel the factories. “The factories should be committed to applying the environmental regulations strictly, and violators should be closed,” he added. Environmentally speaking, Shoeib said that coal was much the same as mazut, but it was available at a cheaper price. In an attempt to secure fuel supplies, Suez Cement and Italcementi recently inaugurated the first waste-treatment plant in Egypt that generates energy. The project uses 45,000 tonnes of household waste to produce 35,000 tonnes of alternative fuel annually. For consumers the increase in cement prices has come at a bad time. “It is worrying, particularly at this time when Egypt's economic performance, including that of the construction sector, is suffering,” said Hisham Al-Qwesni, a civil engineer and head of the construction department at a private company. “Cement is different from other building materials, as when a problem occurs in the local steel industry importing the product could be an alternative for consumers, but this is not the case with cement,” he added. Consumers prefer to use locally produced cement because they fear problems with storage when shipping imported cement. Excess humidity can easily ruin a shipment, Al-Qwesni said. Since cement is an essential product for construction and the hikes in prices will lead to an increase in all other building products, according to Al-Qwesni the government should intervene “to achieve a balance in local market prices” in order to protect consumers. The cement industry started in Egypt in 1911, when the first factory was established in Alexandria. Egypt is now one of the largest cement producers in the region, having some 20 companies. One of these is in the public sector, while all the rest are private.
