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Egypt’s cement industry faces tough times ahead

World Cement,

Pricing controversy

According to Egypt’s Consumer Protection Agency, cement prices in the country have been increased by 30%. The agency has lodged a complaint with the Protection of Competition and Prevention of Monopoly Practices Authority, claiming that such a price rise is not justified given the real estate recession and increased cement production capacity and volume. Ordinarily where there is a surplus of supply, prices would be expected to fall.

Increased input costs

Meanwhile, the industry is facing increased taxes in Egypt’s amended economic reform plan. The original economic plan was issued in December and revoked less than 24 hours after being made public. The amended plan intends to reduce the tax burden on the poor and will be implemented over the coming 27 months. This additional cost to industry comes shortly after Suez Cement reported that Egypt’s cement industry is facing a decline in natural gas supply, just as the Ministry of Trade and Industry announced a 50% price hike on mazut, a heavy, low-quality fuel oil used in the cement and ceramics industries. The price of natural gas is also set to increase from US$4/mmBty to US$6/mmBtu.

Outlook: stormy

Egypt’s economy has been struggling since the 2011 revolution. Last week, the first annual meeting of the ‘Save Egypt’s Economy’ Conference took place, during which Egypt’s budget deficit was under discussion. Foreign investment has fallen significantly under the threat of further civil disruption and Egypt’s traditional failsafe industry – tourism – has likewise suffered. During the conference, Salah Gouda, president of the Economics Studies Centre, suggested removing subsidies on factories that consume a lot of energy, including cement plants, as a means of reducing the budget deficit. Gouda further suggested that the elimination of subsidies for cement exports would generate additional revenues for the country. This all speaks of tough times ahead for an industry that just a few short years ago was booming.

Written by Katherine Guenioui.

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