CAIRO - Mirroring the economic slowdown in Egypt, cement prices have fallen by around 30 per cent, traders say. Cement plunged to LE425 ($71) this month from an average LE700 per tonne compared to September 2010, one trader said. While analysts attribute the decline in prices to fundamental factors – supply and demand – traders blame sector protests and deteriorating security conditions. "The construction sector has taken a serious blow, public and private investments are on hold. The property market is also in a slump. The mood on the market is not good," Reda Hassan, the Chairman of Global Trading for Building Materials, told the Egyptian Mail in an interview. But don't falling cement prices attract more investment in the construction sector? "Demand is in decline, which is a bad sign. When the construction sector recovers, the whole economy also picks up. There is a strong correlation," Hassan said. Egypt's largest listed cement maker Suez Cement and its subsidiary Torah Cement stated that their first-half (H1) net profit declined by 37 and 12 per cent respectively. Sinai Cement's H1 net profit dropped by 27 per cent, according to the Egyptian Exchange. “As a trader, my profit margin will be lower than usual. Producers', gains have been affected. But it is an open market and no one wins all the time,” he noted. According to Ahmed el-Zeiny, the head of the building material department of the Cairo Chamber of Commerce, production has plunged by 50 per cent over the past months. "Cement output slowed to 1.8 million tonnes in August from a monthly average of four million tonnes," el-Zeiny said. Egypt produces around 50 million tonnes of cement per annum and aims to boost its capacity to 80 million tonnes a year by 2012. "The cement market is in a bad state. After deducting LE60 from the price, the revenue amounts to LE395 per tonne. This very low price incurred losses of LE18 million over the past two months," said Osman Hammad, the Chairman of the National Company for Cement, adding that his plant cut its daily output to 4,000 tonnes from 12,000 tonnes. Despite the slump, the Industrial Development Authority (IDA) seems to be heading upstream, unveiling plans to offer 12 new cement licences by mid-October. "The authority aims to increase Egypt's output by 18 million tones. Each licence will add 1.5 million tones," Ismail el-Nagdy, IDA's chairman, was quoted by local media as saying last week. As cement is generally a key factor in housing and development, there's a need to boost output due to population growth, analysts say. The United Nations forecast Egypt's population to reach 100 million by 2020. By 2050, the population could reach 140-155 million, according to Egypt's Supreme Council for Urban Planning and Development. Repercussions of the political unrest have reduced growth in the North African country in the third quarter of the fiscal year (FY) 2010/2011 to a negative 4.2 per cent, according to official data. It returned to positive growth of 0.4 per cent in the fourth quarter, Fayza Abul Naga, Minister of Planning and International Co-operation, has said. Egypt's fiscal year begins on July 1. Abul Naga expects Egypt's economy to expand by 3-3.5 per cent in FY 2011/2012. Civil unrest, conflict and demonstrations in Egypt, Tunisia and Libya have led to uncertainty in the region, according to the US-based Portland Cement Association (PCA). "In Egypt, there is a suggestion that demand could drop by 7 to 10 per cent this year rather than the 3 to 5% growth predicted before the demonstrations," the PCA said in a study. According to the market research centre, global demand for cement will be on the rise in the coming years due to global population growth. "World demand for cement is forecast to rise by 4,1 per cent to 3,5 billion tonnes in 2013," it said.
