Read part one of ‘Can the Cement Industry Survive the Arab Spring?’ here.
The MENA region is a mixed bag. On the one hand you have steady population growth and a young working age population fuelling construction and in turn increasing the demand for cement, while at the same time we face supply shortages, security issues and bureaucratic hurdles. In this context, what can be done to contain the problems and make the best of the current situation?
Energy conservation will be key in the coming period; it is no longer optional. Companies must optimise energy consumption on all levels. This can be achieved by investing in the most advanced production technology that will eventually translate into cost savings. Globally, cement plants have started moving away from wet to dry production, and a number of companies are developing and implementing innovative technologies to address energy consumption in every phase of the production process. Smarter, less energy intensive techniques include things like advanced process control, power management, energy efficient drive systems and the use of captured waste heat to both generate power and reduce environmental impact.
We must also prepare for a scenario that will see us replace traditional gas and liquid fuels with solid fuels like coal/petcoke and other alternative fuels. Transitioning to solid fuels will be a huge paradigm shift in a region where oil and gas have been historically abundant at very low prices. Before we can make the switch to coal, bold government action will be required to tackle the requisite environmental aspects and logistical systems. None of the MENA countries, with the exception of Tunisia and Jordan, are at present ready to switch to solid fuels. Work is therefore still needed to convince stakeholders at all levels to accept this inevitable change.
The fuel shortages and increasing costs of energy in our home market, Egypt, have made it imperative for us to move forward with solid fuels, but we will not be able to do so without full government support. Domestic coal production is currently nowhere near the required levels and thus obtaining import approvals will be a necessity.
Companies must develop and enhance their own in-house security teams in order to minimise disruptions and ensure that production facilities remain safe. These teams will not be acting on their own to replace the police force; they will rather act as part of a coordinated effort to fill in the gaps and thus they also need to develop strong relationships with local authorities.
A strong preference must be given to building qualified local management teams that can gradually replace foreign staff. At ASEC Cement, we have initiated this process in our operations in both Algeria and Sudan. Hiring local staff helps reduce overheads, increase efficiencies, and provide local communities with knowledge transfer.
Above all, cement companies operating under challenging conditions need to be responsive and flexible. As conditions on the ground are rapidly changing we need to be capable of reacting in a timely manner and switching gears if it becomes necessary. The speed of our reactions to unfolding events on both political and economic fronts will be a determining factor in whether or not we succeed.
Why we are still here
In spite of the opacity and uncertainty of the current political climate, the fundamentals of the region remain strong. Even after the uprisings, profitability levels in the Middle East and North African cement markets remain higher than global averages.
ASEC Cement has invested in new plants in Egypt, Sudan and Algeria, where strong fundamentals such as large growing populations, abundant raw materials and low production costs will eventually lure back high levels of public and private investment into infrastructure and industrial modernisation initiatives, boosting demand for cement.
In the midst of the political turmoil that has been a fact of life in Egypt for the past three years, ASEC Cement has forged ahead with its two greenfield projects: ASEC Minya’s US$360 million 2 million tpa plant, and the expansion of ASEC Ready Mix, a company that produces ready mix cement at four separate plants in Assiut, Qena, Sohag and the recently launched Aswan plant.
The first full year of construction at ASEC Minya coincided with Egypt’s first year post revolution, which, understandably, caused a number of delays and setbacks. Nonetheless, we were able to fully launch the production of clinker and cement in September of this year. We are very proud to say that ASEC Minya is the second greenfield cement plant to be launched by ASEC Cement in five years. The first was Takamol Cement in Sudan, a 1.6 million tpa plant that began production in November 2010.
ASEC Cement has also recently entered the Iraqi market through a consortium in partnership with Qemmet El-Iraq, which will overhaul and manage the 2 million tpa Muthanna Cement plant in Southern Iraq’s Muthanna Governorate on a 14-year contract. Our entry into the regionally important Iraqi market is a promising new milestone for ASEC Cement. In light of Iraq’s current plans to rebuild and modernise its infrastructure and launch major housing, industrial and community projects, we feel that the rehabilitation of Muthanna will become an important part of Iraq’s investment in bridging the supply gap, particularly in the south.
Having the flexibility to alter strategy that complies with the demands of existing market conditions has enabled ASEC Cement to minimise its losses and position itself for future growth once markets rebound. We are confident that both our company and our industry as a whole will be able to withstand and overcome any political, economic, security and bureaucratic challenges that come our way.
Written by Giorgio Bodo, ASEC Cement, Egypt. This is an abridged version of the full article, which appeared in the November 2013 issue of World Cement. Subscribers can view the full article by logging in.
Read the article online at: https://www.worldcement.com/africa-middle-east/24102013/the_arab_spring_causes_problems_for_cement_companies_part_two_action_plan_333/