Yemen’s public cement sector under threat from high fuel prices

Local Sources have reported that Yemen’s leading cement manufacturer, the Public Corporation for the Cement Industry (CCI), is close to bankruptcy. Production at these government run plants in Bajel, Amran, and Bahr has deteriorated, largely due to increases in the cost of fuel.

The issue can be traced back to 2010, when the Yemeni Petroleum Company (YPC) approved the doubling of the price of diesel from YR90 – 180/l. The increase in cost was a result of government subsidies for other fuel derivatives such as petroleum and kerosene. For comparison, the price of 1 l diesel in Saudi Arabia is YR10, eighteen times less than the Yemeni price. As the main fuel source of the country’s cement industry, diesel’s price hike has certainly caused losses.

The Barh plant is a prime example. The largest cement producer in Yemen by volume, the plant consumes around 165 000 lpd diesel. Due to the suddenness of the 2010 price hike, it was unable to react quickly enough with a contingency plan. The result has been a significant drop in production, the only affordable solution that could be implemented with sufficient speed. In the case of the Bajel plant, the losses were so high that instant closure was the only possibility.

The private sector is still going strong however, with an output of 3 million tpa that overshadows the government sector’s 2.25 million tpa. The source of the private sector’s success lies with its quick switch to the utilisation of charcoal as its primary fuel; using charcoal can decrease the production cost per bag of cement by up to YR400 compared to cement produced in a diesel fired process.

Many in the industry have asked why funds raised through the higher fuel prices have not gone towards finding solutions for these struggling cement plants. Some workers have even voiced concern that the government might be encouraging the plants to collapse so that they can be privatised. According to Yahia Altabib, the head of a Yemeni construction syndicate, the country’s abundance of raw materials means that its cement industry has the potential to thrive and become a major global player. Altabib also highlighted that over 4,000 trained workers will be forced out of work if the government is not able to manoeuvre to cope with the issues faced by the sector.  

Whatever the outcome, it has become clear that the government cement sector cannot continue indefinitely in this vein.

Written by Jack Davidson.

Read the article online at: https://www.worldcement.com/africa-middle-east/29012013/yemen_public_cement_sector_fuel_diesel_price_hike_848/