MENA and Turkey: new skyscrapers in the cement industry

Introduction

The high scale investment in infrastructure projects has become the principle reason for the boom in the cement market of the Middle East and North Africa (MENA) region and Turkey. In 2010, the per capita cement consumption in the MENA region was 700 kg pa, in comparison to the world’s average of 400 kg. On the production front, Turkey tops the chart in Europe and ranks fourth in the world.

With increasing government expenditure on infrastructure development and housing projects in countries such as Saudi Arabia, the UAE and Qatar, the demand for cement will surge further. According to ‘Global Construction 2020’, the MENA region is anticipated to spend US$4.3 trillion on construction during the next ten years. The Turkish economy is no different in this regard. Around 6% of the country’s GDP accounted for similar activities during the first half of 2011. Thus, it is quite clear that the cement industry holds a bright, promising future in these regions. 

MENA

The Middle East and North African countries constitute the MENA region and, due to the regional disparities, the cement industry does not exhibit any collective characteristics. Each country in the region is distinctive, in terms of competition, raw material, players and political climate. Over the years, there has been substantial infrastructure development, investment and capacity expansion, which has led to an exceptional growth in the cement sector.

Research has identified Saudi Arabia as the rising star in the region’s cement industry, with ongoing construction projects for 2012 valued at SAR237.4 billion (US$159.06 billion). According to Zawya, the leading business intelligence on the MENA region, production in Saudi Arabia is estimated to have reached around 62 million t in 2011, and it is forecast to grow by more than 13% pa in the near future. Output has also increased in countries such as the UAE, Lebanon and Iraq on the back of growing demand for cement from social welfare, housing, employment programmes and dam-building projects.

On the contrary, the political turmoil experienced in countries such as Syria, Egypt and Libya in 2010, has halted the progress of the cement market, with both demand and output falling in these nations.

Turkey

The Turkish cement industry has achieved a key position in the world for its high capacity, product quality, world-class research and development centres and export potential. With the ongoing expansions and investments, a moderate increase in Turkey’s cement output is expected. As the country is already among the world’s top cement producers, robust growth is unlikely. The growing requirement from infrastructure development will lead to an increase in domestic demand as well as exports. It is anticipated that cement production will increase at a CAGR of approximately 3.8% to reach 73.5 million t in 2015, and its total sales will surge at around 3.5% during 2012 – 2015.

Competitive landscape

Companies are not only looking at their local markets, but also seeking opportunities in other countries. Saudi and UAE investors are planning to invest US$500 million in Egypt, though details have not yet been disclosed. Likewise, the Arabian Cement Company is going to expand facilities at its Rabigh plant, increasing its capacity by 7000 tpd by 2014. Qatar National Cement Company has made an effort to meet cement demand driven by the construction activities taking place in the country in preparation for the 2022 FIFA World Cup. The company has started the trial operation of its QAR22 million (US$6.072 million) plant located in Umm Bab, which has the potential to produce 250 tpd of calcium carbonate. On similar lines, the Southern Province Cement Company has also achieved an output level of 24 000 tpd of cement, with the start of commercial production in the second line at its Tahama plant.

Foreign as well as domestic investors are eyeing this lucrative market. For example, Lafarge is planning to triple the cement output at its plant in Karbala, Iraq, over the coming years. Likewise, India-based JK Cement has an investment plan of AED55 million (US$14.96 million) for building a white cement plant in the UAE.

In terms of expansions and innovations, Turkey is in no way lagging behind. Akçansa, Cimsa, KÇS Cement Italcementi and Cimpor Cimentos de Portugal SGPS SA are some of the major players in the country. For the first time in its history, a waste heat recovery (WHR) project was constructed by Sinoma-EC for Akçansa Cement Plant to reduce carbon dioxide emission to 60 000 t, and save nearly 105 million kWh of energy and 36 000 tpa of standard coal.

Industry bottlenecks

Despite the strong growth in cement demand, owing to infrastructure development in the MENA region, some bottlenecks still exist that have to be taken care of. Some challenges are unavoidable as they are built-in characteristics of the industry. However, there are some specific impediments in the countries of the MENA region.

Although these bottlenecks cannot be generalised for all the countries, they are common in most of the nations. These problems include:

• Fuel shortage.
• Dependence on oil.
• Oversupply.

Lack of investment in innovation.

Industry regulators and companies could take into account the following measures in order to retain and improve the remarkable position of the MENA region’s cement industry in a global context:

• Adoption of alternative fuels (AF).
• Non-conventional techniques for cost reduction.
• Investment in research and development.

Road ahead

The future of the cement industry is bright in both the MENA region and Turkey. With economic expansion, expenditure in construction and investments will fuel the industry’s growth. In addition, government support, in terms of infrastructure development, providing licenses to new entrants and fuel subsidies, will continue to help the sector maintain its speedy growth. Furthermore, foreign investments will push technology spillovers and companies should encourage collaborations and mergers with foreign counterparts to obtain innovative, fuel efficient and eco-friendly technologies.

Although there are immense positive factors supporting the industry, concrete steps still need to be taken to overcome the hurdles in the way of the road to success. Suggested measures, such as alternative fuels and non-conventional cost saving strategies, will not only help improve efficiency, but will also sustain growth.

Written by Shushmul Maheshwari, RNCOS, Russia.

This article is an abridged version of the full article, which appeared in the June 2012 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/28052012/cement_industry_turkey_mena_exports_growth_expansion/