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Thursday, 17 December 2020

LaFarge chief on how to save his industry

It’s going to take more than just lower natural gas prices to uplift Egypt’s ailing cement industry, LaFarge Egypt CEO Solomon Baumgartner Aviles writes in an opinion piece (pdf). According to Aviles, the price of natgas should be USD 1.7 per mmBtu — which is much lower than the current USD 4.5 per mmBtu manufacturers and exporters pay — to entice cement producers to use natgas instead of carbon-intensive coke fuel.

Manufacturers can’t offload excess inventory through exports, either, because inflated production costs would make it hard to compete abroad, Aviles said. And it’s not just high energy prices that are driving the high input costs. A weaker EGP (since the float) and higher taxes also play into the difficulties, Aviles added. Cement manufacturing remains plagued by its longstanding oversupply problem, with existing production lines this year having the capacity to produce 38 mn tonnes more than the country needs, he notes.

Background: Things have gone from bad to worse for the cement industry since the supply glut began in 2016. The inauguration of a large state-owned cement factory in 2018 intensified the pre existing issues, quickly leading to several companies suspending operations, some temporarily and others permanently. The industry in September called for government intervention, saying it is time to explore “radical” solutions. You can read our deep dive into the cement industry from earlier this year, when prospects for the sector already looked bleak.

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