Construction of new cement plants is under way in Africa.
At least nine new cement plants are under way in Africa, where leading producers are expanding capacities to meet growing construction demands on the continent. The work will cost billions of dollars and take several years to complete, but political instability poses risks.
All eyes are on North Africa, where cement demand is expected to boom once new governments review construction sector policies in Egypt, Algeria and Libya.
The rebuilding of Libya is at the top of the regional agenda. However, the region’s leading cement firms report sluggish performance—especially in Egypt—due to the political unrest of this year’s Arab Spring.
Italy’s Italcementi Group, in its third-quarter earnings statement, attributed continued risk to shaky spending policies in the region. “In Egypt, the mood remained uncertain due to the political and social crisis,” it says. “In Morocco, the favorable trend in cement consumption of the first half of the year continued in the third quarter, assisted chiefly by private investment in social building and by the public-works sector.”
Led by subsidiaries of two international companies—Paris-based Lafarge and Zurich-based Holcim Group—four cement makers are building new plants in more than 10 countries with a combined capacity of 15 million tonnes per year.
Last August, Lafarge subsidiary Lafarge Cement Wapco Nigeria began producing clinker, or partially finished cement, at its $476-million Lakatabu cement plant, which has a capacity of 2.5 million tonnes per year. It is the first of the four Lafarge projects scheduled to go on line by the end of 2013.
Three other Lafarge subsidiaries, including Nigeria-based Ashaka Cement and Morocco-based Lafarge Zimbabwe and Lafarge Maroc, are building in the region additional plants that will increase the largest global cement maker’s capacity by an additional 3.4 million tonnes annually over the next two years.
In Morocco, Holcim Group, the world’s second-largest cement producer, is making progress on a new plant with an additional capacity of 1.5 millions tonnes per year through its subsidiary Holcim Maroc. The plant, at Fez, kicked off in 2009 and is expected to be ready in the first quarter of 2012.
Cement Co. of Northern Nigeria, through its subsidiary Sokoto Cement, is expanding capacity by 0.5 million tonnes per year. It is building a second kiln line, costing $146 million, the company says.
Local Players
The multinational cement companies are just part of Africa’s cement story. Africa’s leading producer, Dangote Cement, plans to bridge the gap between supply and demand in Africa in the next two years, with more than $3.9 billion in new cement lines in the works.
“The Group plans to construct a 3-million-tonnes-per-year plant in South Africa and one grinding plant in Cameroon with a capacity of 1.5 million tonnes per year,” says Devakumar Edwin, the group’s executive director of business development.
The Cameroonian project, which Edwin says will take up to 17 months to complete, will be the third plant in the West African nation. It currently has one cement company, CIMENCAM, with a capacity of one million tonnes per year from its two plants.
Dangote also is planning new cement plants in Nigeria, Tanzania, Senegal, Zambia, Congo, Ethiopia and Benin, with a combined capacity of 11.1 million tonnes per year.
In East Africa, Kenya cement producer Athi River Mining is expecting to complete two plants in Tanzania—one with a capacity of 0.75 million tones per year, the other 1.5 million tonnes per year—in the first quarter of 2012.
“This is part of our final push toward transforming our company into a regional giant,” says Mr. Pradeep Paunrana, the company’s CEO.
Athi River is also pushing for the construction of a new plant in South Africa, with production targeted for 2013, Paunrana adds. The project is scheduled to begin after completing the Tanzania plant, in 2012.
Within Eastern Africa, Pakistan’s largest cement manufacturer, Lucky Cement, will construct a $175-million cement plant in the Democratic Republic of Congo under a joint venture with East Africa-based Groupe Rawji. Construction work for the one-million-ton-capacity plant will commence in the first quarter of 2012, according to the company’s finance director, Abid Muhammad Ganatra.
The project, which will take three years to complete, paves the way for Lucky Cement to enter a country whose cement industry is dominated by Germany’s HeidelbergCement and The Forrest Group.
Booming Demand
Other new cement plants with smaller capacities are under way as many African nations experience an increase in public expenditure in infrastructure development, discovery of oil and coal, and the increasing role played by China in the exploitation of the region’s resources.
“The demand side is looking positive,” says a cement market analysis for 2011 by Imara, an investment banking and asset management group. “Improved political stability, fiscal management and lower sovereign debt levels have availed funds for capital investment, and [despite] the post-2008 commodity price shock, economic fundamentals, for the larger part, are improving.”
In East Africa, Kenya’s construction industry attracted 60% of the total investments in the first quarter of this year, according to the Kenya National Bureau of Statistics. Public spending in road construction there rose by 33%, to $935 million, over the past year.
The region’s construction industry is expected to grow to $9.4 billion by 2016, up from $6 billion today, according to business research firm Frost & Sullivan.
South Africa, whose construction sector slipped to 1.5% last year from 7.4% in 2009, expects a rebound of the sector’s performance. A $116-billion infrastructure plan unveiled this year by President Jacob Zuma targets expansion of roads, energy and freight transport.
West Africa, with production capacity of 21 million tons per year against a demand of 33 million tons per year, holds major potential for cement companies willing to ramp up their capacities. Nigeria, one of Africa’s major oil producers and the largest cement market in the region, produces 16 million tons per year, with an average annual cement demand growth of 10%.
