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China-Africa Trade Information Service
info.afrindex.com
China-Africa Trade Information Service
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Ethiopian cement production capacity grew at an average annual rate of 6.8% between 2013 and 2018. The increase in capacity is due to the government's five-year growth and transformation plan, as well as the federal incentive to attract local and international cement producers.
"Typically a heavy-consuming cement market, Ethiopian cement production had proven insufficient to meet demand until 2014, thus making Ethiopia an importing market," CW Group Business Analyst, João Sobrinho. "Through this expansionist agenda, the domestic cement industry is increasingly becoming a net exporter and improving its international competitiveness".
Recent entrants into the market have included Dangote Cement, Derba, Messebo, and National Cement, while Abay Industrial Development Share Co. recently signed a contract with FLSmidth for the construction of a greenfield cement close to the city of Dejen.
Valued at €100 million, the contract will see the Danish engineering company construct a 5000 tpd plant, including design and engineering, full equipment supply, automation systems, installation, and commissioning, as well as training and extended supervision. It is expected that the order will be completed in 2022.
"Ethiopia's cement sector registered the highest CAGR in the last decade when compared to all East African markets," Cement Business Research (CemBR) said in a recent research note. However, "after the buoyant trend of recent years, the market is expected to decline in 2018, when cement producers are tackling a long list of challenges: unfavourable supply-demand balance, higher cement prices, escalating production costs, low utilisation rates, social unrest, and a lack of foreign currency."
"In the medium term, the domestic industry will have to focus on solving these setbacks, if it wishes to become an international cement force to be reckoned with," agreed CW Group's Sobrinho, who also mentioned a shortage of skilled workers as among the challenges facing the industry.
The Ethiopian industry faces some of the highest energy costs in the region, while recent capacity additions have resulted in severe overcapacity in the country. The industry operated at around a 50% capacity utilisation rate according to both CemBR and CW Group. "It is now evident that the high-cost producers might have to shut down in order to give the industry a breather in terms of supply-demand balance," concluded CemBR. "If the structure of the industry continued as it is today, profitability may suffer further for all participants."
Despite these challenges, CW Group expects Ethiopia's cement consumption to grow through 2023, driven by a strong economy -which is expected to be the fastest-growing in Sub-Saharan Africa, noted Sobrinho – and the government's 2015-2025 Cement Industry Development Strategy.
