This week the Tunisian cement market captured attention, as Votorantim intends to divest its assets in the country, making way for the Chinese to enter this north African market. Sinoma Cement Co Ltd wants to pay up to US$145m to buy the 1.8Mta Jbel Oust cement plant and its subsidiary Granulats Jbel Oust.
CNBM, and its two listed units of Tianshin Material and Sinoma International Engineering, agreed the sale with Votorantim Cimentos. The Jbel Oust cement plant is expected to serve not only the domestic market but also international exports as it is located close to Tunis port.
Tunisia's weak economy threatens long-term growth
Buying into the Tunisian cement market at this point may not see quick returns as the economy remains weak. Tunisia has been in discussions with the IMF about its loan programme, having initially agreed a US$2.8bn loan from the IMF in December 2016, of which it had received US$1.4bn by April 2024. Moreover, inflationary pressures caused the government to raise interest rates in February 2024.
Tunisia's economic growth is estimated to expand by 1.9 per cent in 2024, according to the IMF. Cement demand has been slow to recover since the pandemic and is forecast to grow by 1.8 per cent in 2024 to 5.57Mt, according to the Global Cement Report, 15th Edition (GCR15).
An industry in transition
The timing of the Sinoma deal could be positive for the Chinese for export potential to Europe and Africa. Colacem obtained the CE mark for its three cements in 2020 and Hanacem began CE exports from the port of Gabes in the same year. However, European exports are expected to become more costly as the full implementation of the Cement Border Adjustment Mechanism (CBAM) approaches. Historically, Algeria is the largest importer of Tunisian cement, reports GCR15.
The domestic market still showed a negative 5.8 per cent YtD cement volume change and production fell 10 per cent in March 2024 (see ICR August 2024). Local cement producers have undergone testing times, but are surviving in a market of 13.74Mt of installed cement capacity, according to GCR15.
Carthage Cement, a local competitor, posted an accelerated growth rate in the 2Q24 and posted a revenue growth of 3.5 per cent in the 1H24 compared to the 1H23. In 2023 Carthage also saw an 18 per cent rise in turnover with increased sales, although much of this was from exports.
Meanwhile, fuel concerns deepened for Les Ciments de Bizerte in the 1Q24, leading to a drop in turnover of TND12.26m (US$3.9m) or a 52.6 per cent fall compared to the 1Q23. The lack of petcoke availability was costly with the plant dependent on this fuel type for its operation.
The country's oldest cement plant, under the control of Les Ciments Artificiels (Colacem group), at Djebel Djelloud has also needed to attend to its CO2 emission control. In 2023 it set a target of reaching a 25 per cent reduction in CO2 by 2025 using alternative fuels and by replacing electricity from the grid with renewable energy from a 100MW solar wind farm.
There is potentially a newcomer looking to set up a 1.5Mta integrated plant at Bir Thlathin, using thysssenkrupp Poysius technology. The United Cement Investor project commenced in 2019 but appears to have been delayed with abundant overcapacity.
A new Votorantim strategy developing?
The strategy for Votorantim by exiting its Tunisian operations could assist its domestic presence, or help it build its wider Latin American interests. The recent divestments of Intercement Participacoes SA offers Companhia Siderurgica Nacional (CSN) a platform to challenge Votorantim as the top producer in Brazil. It is not known yet how Votorantim will react to this development. However, Votorantim has a BRL5bn (US$1bn) investment plant in Brazil over the next five years to lift cement production and to invest a further BRL5bn in other Americas countries where it operates.
In an interview with Bloomberg, the company's CEO, Joao Schmidt, announced in April 2024 that the strategy has been to "balance the portfolio and reduce cyclical risks as well as to diversify into new industries and geographies."
