Solomon Bumgartner Aviles, CEO of “Lafarge Egypt”, warned that the cement sector in Egypt is “on the edge of a precipice,” noting that companies are operating at only 60% of their production capacity, as a result of a large surplus in production, amounting to 33 million tons annually. , Which is equivalent to about 40% of the sector’s production capacity in the local market.
Cement companies have been suffering for years under the weight of high production costs, with a large surplus in supply that forced them to reduce their prices, in an attempt to continue in the market.
Aviles added, during a press conference via the Internet, yesterday, Tuesday: “If the government does not move quickly and take urgent decisions, then a number of companies will be forced to close and will not bear more losses.”
He added that the government’s decision, last May, to suspend building permits in Greater Cairo, Alexandria, provincial capitals and major cities for a period of 6 months, “deepened the crisis and contributed to the decline in the fundamentally low demand,” so that this month witnessed the worst cement production rates in the history of Egyptian industry.
He pointed out that there is a proposal before the government, which includes setting a maximum production limit for each company, to achieve a balance between supply and demand and reduce the surplus in the market.
The crisis has already toppled several companies, as many entities have been forced to shut down completely or partially, over the past two years, while new factories belonging to the army entered the market, deepening the surplus production in an already overstuffed market, to the extent that it also incurred losses.
Last August, informed sources revealed to Al-Araby Al-Jadeed that the sales of the National Cement Company, which is affiliated with the army, fell from 950,000 tons in December 2019 to about 400,000 tons in July. The past, down by 58%.
The sources explained that the company has 6 production lines, of which 4 operate, while two lines were suspended after the intensification of the sales stagnation due to the repercussions of the new Corona virus pandemic on the construction sector.
She indicated that the losses affected about 77% of the cement companies operating in Egypt, with which the army has entered into fierce competition with them in recent years, pointing out that there are 22 cement companies, 17 of which recorded losses, compared to 5 companies that made profits.
Recent data issued by the Building Materials Export Council showed that cement exports decreased by about 23% during the first six months of 2020, compared to the same period last year, according to the Building Materials Export Council data.
According to the latest data issued by the Cement Division of the Federation of Industries, at the end of 2018, the volume of investments in an industry is estimated at more than 250 billion pounds (15.7 billion dollars), which absorbs 50 thousand direct labor, and 200 thousand indirect.
The CEO of “Lafarge Egypt” said, “It is necessary at this critical stage to focus on the basic problem, which is the oversupply of the market.”
The “Lafarge Holcim” group is one of the largest international companies specializing in the building materials industry. It was established in July 2015 as a result of a merger between the French “Lafarge” cement company and the Swiss “Holcim” company, so that the market value of the new entity reached about $ 50 billion. It operates in 90 countries around the world.