This week the construction of the Lemi National Cement industrial Complex by East Africa Holdings (National Cement) and West China Cement Ltd in the Amhara region of Ethiopia was announced. This privately-owned industrial park will invest US$2.2bn into the production of building materials, including a 10,000tpd cement plant, adding 3.3Mta to domestic cement capacity and is scheduled to take 18 months to complete. It will take 5-7 years to before the complex is fully complete.

Cement demand in Ethiopia reached approximately 12Mt in 2019, but domestic cement producers are only providing about 8.9Mt of this total, according to the Chemical and Construction Inputs Development Institute (CCIDI), in spite of nominal installed capacity in the region of 20Mta.

The shortage in cement supply was highlighted last autumn when the Ministry of Trade prepared new guidelines to sustain the supply chain and opened up new opportunities for the private sector to take part in the process. Previously, government organisations were required to procure cement directly from the factories.

At the time, Melaka Alebel, Minister of Trade and Industry, attributed the root cause of the supply shortage to shortcomings in the cement industry, such as a lack of spare parts, power outages, lack of inputs including raw materials, security issues and a lack of leadership and professional skills. In the past, foreign currency availability has also been an issue for companies seeking to source space parts from overseas. Truck shortages have also hindered the delivery of cement.

Infrastructure boost
The government budget for FY20-21 has stimulated cement demand with ETB58.8bn (US$1.45bn) spent on road programmes and five new bridges. Chinese investment is  transforming the country's railway infrastructure with a US$3.4bn project connecting Ethiopia to Djibouti. In the last decade, Chinese funds also built the US$800m metro system around Addis Ababa. Meanwhile, work continues on the construction of the US$4bn Great Renaissance Dam, on the Blue Nile tributary of the river Nile. This is Africa's largest hydroelectric dam project and aims to end the acute electricity shortage in the country that has seen 65 per cent of the population unable to connect to the national grid.   

Capacity increases are coming
Ethiopia's cement shortages have encouraged new investment in the cement sector. This was further stimulated when the government lifted the ban on foreign investment in the sector in February 2020. At this time, the country was stated to have a cement capacity of 17.1Mta, according to the CCIDI.

The need for higher cement production has encouraged domestic producers to make plans for capex projects. East African Holdings (National Cement) is not only building the new plant in Amhara but conducted a study last autumn to increase its cement capacity at the Dire Dawa plant by 30 per cent.

Mugher Cement is also boosting its cement production and is aiming to take its share of the market to above 25 per cent, according to Minister of Mines and Petroleum, Takele Uma. In addition, Midroc Ethiopia Plc plans a 2.5Mta expansion of its Derba plant.

The newest plants under construction are Abay Cement Factory, which is an FLSmidth project, and Ethio Cement (ETEM), Wacem group, and its plant in Chanco. The Abay Cement integrated plant will have a 2.5Mta cement capacity and will be located in Dejen. The Chanco integrated facility will have a similar capacity of 0.77Mta.

Fuel shortages
Fuel shortages also have had an impact on Ethiopian cement prices, but the Ministry of Trade and Industry took regulatory measures to help stabilise cement prices in the summer of 2020 after prices for a 50kg bag had doubled to around ETB450 (US$13/bag) before falling back to ETB220-250. Shortages of imported materials had seen cement producers source local supplies of coal for manufacturing, but this led to sharp increases in local usage from 20 per cent up to 60-100 per cent. There has been a government drive to encourage the industry to replace coal imports with locally produced biomass which would lower production costs as well as lower CO₂ emissions.

Political instability
The location of the Lemi National Cement industrial Complex is in close proximity to the Great Renaissance Dam project which has caused political tension with Egypt. It is also situated just south of the Tigray region, where local leaders oppose Prime Minister Abiy Ahmed's election and armed conflict flared up towards the end of last year, while Amnesty International reports of crimes against humanity were committed here in 2020. 

Ethiopia remains a high-risk country in which to do business. The cement sector is well-established but is undergoing huge changes and the pressure is on to improve cement supply, secure cheaper fuel and reduce the cost of cement production while reducing imports.

Published under Cement News