Gas and electricity constraints, combined with price manipulation and environmental challenges, are mounting pressures on Egypt’s cement industry. As energy policies shift and investors face hurdles in sourcing power, questions about sustainability, efficiency, and fairness in the sector’s ambitious growth plans remain unresolved.

At a press conference following a meeting with the newly elected members of the Federation of Egyptian Industries (FEI), who began their new term in early September, Rasheed Mohamed Rasheed, Minister of Trade and Industry, stated: ‘Egypt will need an additional 18m tons of cement by 2015. The ministry, in collaboration with the Supreme Council of Energy (SCE), is studying this matter in detail, with results to be announced by the end of the year.’

Rasheed also noted the potential for importing energy to support industrial activities, pointing out that major countries like the US and Japan adopt similar practices to sustain their industrial expansions.

The Industrial Development Authority (IDA) announced at the end of August its timeline for offering 12 cement production licences, a move approved two days earlier by the SCE.

However, this decision followed months of conflict between the Ministry of Oil and the Ministry of Trade and Industry. The Ministry of Oil had proposed importing cement from abroad instead of establishing new plants, arguing that it would be more economically viable and save significant quantities of natural gas.

The Ministry of Trade, however, dismissed the proposal as ‘illogical,’ questioning the feasibility of importing an additional 17m tons of cement—the projected supply-demand gap for 2017—which would severely impact Egypt’s trade balance.

Now, it appears that the ministries have reached an agreement aligned with the industrialists’ preferences.

It is worth noting that Egypt’s current cement production capacity is 60m tons annually, with plans to increase this to 77m tons by 2015.

Ambitious Expansion Targets

With these 12 new cement production lines, the government aims to increase the industry’s output by 40 per cent. However, the specifics of how energy will be supplied to these plants remain unclear.

Remarkably, Egypt’s construction sector has continued to grow despite the global financial turmoil, bucking the trend seen elsewhere in the world. This growth has driven a 25 per cent rise in cement demand over the past year, fuelled by a growing population with increasing housing needs and the government’s stimulus packages.

Cabinet spokesman Magdy Rady told Reuters: ‘Demand is increasing by 8 per cent a year. It is expected to reach 77m tons in 2015, so we need to boost output.’

Initially, only eight cement licences were to be issued this year, but delays in the SCE’s decision-making process caused setbacks. In 2007, 15 licences were issued; eight of those facilities are currently operational, five are set to come online next year, and two were re-offered after the initial investors failed to meet execution deadlines.

Once the additional five plants become operational by 2011, Egypt’s annual cement production capacity is expected to reach 64m tons. It is estimated that establishing a new cement production facility takes up to three years.

The first two companies to express interest in bidding for the new licences are the Egyptian branch of Lafarge and Egypt’s largest listed cement company, Suez Cement, which controls Helwan Cement and Torah Cement. Suez Cement is also a branch of Italcementi operating in Egypt.

Energy Constraints Intensify

Rasheed has made it clear that the owners of the newly offered licences will be responsible for securing their own energy supply, unlike the past government commitments to older plants. Investors will need to source energy either domestically, if available, or through imports, if affordable.

The government has pledged to streamline the legal and technical processes for importing energy, with both the Ministry of Oil and the Ministry of Electricity involved. If successful, this model could be extended to other energy-intensive industries in the future.

Currently, the General Petroleum Authority (GPA) is solely authorised to import such energy products, preventing private sector access to energy markets. This means that companies will have to rely on the Ministry of Oil to manage gas imports on their behalf, a daunting prospect given the ministry’s repeated delays in fulfilling existing commitments to the industrial sector.

‘It is an illogical decision,’ says oil expert Ibrahim Zahran. He argues that Egypt’s ongoing electricity production crisis is a long-term issue. From his perspective, priority must be given to meeting citizens’ basic energy needs.

According to Zahran, Egypt’s future electricity demand is expected to reach 58,000 megawatts by 2026, compared to the current production of 25,000. ‘It is unbelievable to prioritise gas for the industrial sector when we need to triple electricity production,’ he criticises.

Importing gas, meanwhile, is far from straightforward. Saudi Arabia, a major regional producer, prohibits crude gas exports. Geographical constraints make importing from Algeria difficult, especially given strained relations, and Iraq’s ongoing security challenges make it an unreliable supplier.

Another under-discussed option is establishing an electricity plant specifically for the cement project. However, this would be a challenging and time-consuming endeavour, hindered by a lack of expertise and pervasive bureaucracy. Such delays could jeopardise the ambitious target of reaching 77m tons of cement annually.

A more practical and equitable solution might involve revisiting Egypt’s unfairly cheap gas export agreements with other countries. Renegotiating these contracts to reflect international market prices could serve national interests more effectively than navigating the current complications.

Another version of this article is published by AlBorsa English