Czech Inekon Group to Build 1.6 Million-Ton Cement Plant in Egypt

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Inekon Group AS (Prague, Czech Republic) will construct a 1.6 million-ton-per-year cement plant for North Sinai Cement Company (NSCC) in Egypt. The cement plant will be located in Al Arish, the capital of the North Sinai region of Egypt, and is expected to cost around $240 million. The plant will be operational by 2011. Inekon Group won the tender for the project early this year.

PSG International (Zlin, Czech Republic) has been appointed to carry out the project documentation process. The design process is expected to be completed by October 2009. Local construction companies will undertake the construction of the plant. PSG will oversee the construction activity. PSG International has been in the Czech construction sector since 1924, executing turnkey projects in the biotechnology, chemical, petrochemical, cement, food and automotive industries. PSP Engineering AS (Prerov, Czech Republic), which manufactures specialized machinery and equipment for the mineral processing and cement sectors, will supply heavy equipment for this project. The control devices and electronic equipment will be sourced from the engineering division of Siemens AG (NYSE:SI) (Munich, Germany).

Availability of raw material, low cost skilled labor and subsidized energy has made Egypt a lucrative destination for international cement companies. Egypt is among the top six cement exporters in the world. The Egyptian cement sector consists of 12 leading companies, four of which are Egyptian-owned cement companies, while the rest are multinationals. The domestic companies include the government-owned National Cement Company and privately owned Misr Ben Suef Cement, Misr Cement Qena and Sina Cement. In 2007, Egypt's cement production capacity was 41.3 million tons and the country produced 38.4 million tons. There has been a boom in construction activity in Egypt, especially in residential properties and resorts, which has accounted for the consumption of 34.5 million tons in 2007. The country has witnessed a deficit in cement supply that has led to spiraling costs. Constructions costs increased consequently, leading to a slowdown in the real estate market. The Ministry of Trade and Industry (MTI) subsequently banned cement exports to meet domestic demand and help control prices. In early 2008, the MTI levied taxes on the export of cement and steel. The move was aimed at controlling inflation and bridging the demand and supply gap in the domestic market. Initially, the export tax on cement was $11.8 per ton and this then increased to $15.45 per ton. In the wake of current global economic slowdown, the MTI has lifted the export taxes but has indicated that it will re-impose the taxes if the need arises. Egypt has been the largest exporter of cement to the Middle East. In 2007, cement consumption in the Middle East was around 144 million tons, and the construction upswing will see the country's cement demand increase to 180 million tons by 2010.

In 2008, Egypt's cement production will be about 38.5 million tons, while consumption is expected to be in excess of 37.1 million tons. The Egyptian government has recently granted licenses for 13 expansion and greenfield projects. The new plants are expected to increase the country's production capacity by 10 million tons. By 2010, Egypt's production capacity is expected to reach 55 million tons per year.

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