Due to a shortage in supply and an increase in demand, cement prices hiked again over the past few weeks. Mona El-Fiqi investigates As happens every summer, a time considered high season for the construction sector, the price of cement in the local market has hiked, reaching the unprecedented figure of LE700 per tonne. During the past few years cement prices have increased substantially, jumping from LE110 tonne in 2002 to LE500 per tonne in 2008. The problem of prices began when public cement companies were sold to the private sector, including some international companies that began controlling the market, leading consumers to complain. According to Egyptian Competition Authority investigations, these companies were acting monopolistically to control local prices. By court verdict, 10 companies were ordered to pay LE180 million in fines in 2008. However, consumers are shocked to find cement prices still going up. "This means that the cement companies do not care about any of the government's regulations; even imposing fines did not stop them controlling the market. I think selling the cement companies was a great mistake by the government," says Murad Ahmed, a contractor. Consumers are also complaining of a clear shortage of cement in the market. In a free market, product shortage means an increase of its price. In response to continued complaints, the government took steps in an attempt to cap soaring prices. To ensure that local production meets demand, on 12 July Rachid Mohamed Rachid, minister of trade and industry, issued a decree extending the export ban on cement until October 2010. The decision was made in light of an increase in local demand by 26 per cent this year. According to figures by the Ministry of Trade and Industry, the local construction sector has grown by an estimated 20 per cent despite the international economic crisis. Increased demand in the domestic market also led to the introduction of several other measures, facilitating cement imports. It is expected that cement imports will soon exceed 300,000 tonnes this year. During the April to July period, the total import volume of cement reached 150,000 tonnes, coming from Turkey, France and South Korea, according to figures from the General Authority for Imports and Exports Control. Yet, opening the door to imported cement is not a long-term solution. Hisham El-Quesni, a civil engineer and owner of a construction company, explained that locally produced cement is better than imported cement since it can be used in all construction work whereas imported cement can only be used in finishing work. El-Quesni said he avoids using imported cement since it can easily be spoiled if not stored correctly during the import process. Ali Mousa, chairman of the Building materials division at the Federation of Chambers of Commerce agrees that high demand caused an increase in prices but argues that the problem escalated when cement-producing companies stopped selling enough cement to cover local market needs. "Cement is a product that can not be stored, so the producing companies have to pump cement supply on a daily basis to cover the local market's needs, which did not happen during the past few weeks." To have more control on the market, last week Rachid held a meeting to discuss the current situation of cement and decided to expand supervision of local markets. The MTI's investigators discovered that 87 traders stored cement and refrained from selling it on purpose in order to raise prices. Accordingly they are subject to lawsuits. The MTI also announced a hotline number -- 19805 -- to receive consumer complaints concerning cement. In an attempt to increase supply in the market, last year the government gave licences to new cement factories. Three new factories, with a total capacity of 2.2 million tonnes of cement, will soon start production. Moreover, new production lines for currently working companies are also licensed and expected to commence during the coming few months. Consequently, a press release issued by MTI last week expected cement prices to fall soon. Indeed, newspapers published that cement prices have fallen to around LE530 per tonne following the government's measures. However, earlier this week, Al-Ahram Weekly found out that cement still stood at LE610 per tonne.
