Egypt Trade Ministry to Offer Licenses for Construction of 12 Cement Factories in 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Egyptian Ministry of Trade has announced that it will offer licenses for the construction of 12 cement factories this year to meet growing demand. Despite the global economic crisis, which depressed construction in other countries in the region, Egypt's construction industry has continued to expand.

In September 2009, Trade Minister Rachid Mohamed Rachid was quoted as saying that demand for cement was expected to grow 25% to 30% for the year. Demand for cement in the country is expected to rise considerably in the next decade, with estimates putting the required increase in production capacity from the current 58 million tons per year to a level of 77 million tons per year by 2020.

According to the Industrial Development Authority (IDA), a part of the Ministry of Trade, before the licenses can be offered, the Higher Council of Energy, headed by the Prime Minister, must still give approval for the energy supply required for the plants.

Early in 2007, the government increased export duties on cement in an effort to increase domestic supply and, in turn, lower local prices. Shortly thereafter, a government investigation into the industry raised allegations of price fixing and large-scale corruption.

Despite this, or perhaps because of it, in October 2007, the government made a further attempt to boost local production by offering, at open auction, a series of licenses to construct new cement plants or expand existing facilities. This entailed eight licenses for new plants and two for expansion permits. Companies participating in the auctions were pre-approved by the government after financial aspects and experience in the industry were examined.

Under the terms of the auction, the companies were required to pay 25% of the license cost within 30 days and the balance within 90 days. In total, 14 companies were involved in the process, although two of these were forced to withdraw just prior to the auction for failure to submit letters of guarantees. Of the eight new licenses up for bidding, six were sold, and both of the expansion permits were sold.

In total, the auction brought in more than $145 million, with the most expensive license selling for $45 million to Cement Wadi El Nil (Khartoum, Sudan) for construction of a new facility in the Benei Sweif governorate. Other licenses were issued to:

• El-Sewedy Cement (Cairo, Egypt), which paid $37 million for the license in the Suez governorate
• Al-Arabiya Al-Wataniya, which paid $36 million for a license in Menya
• El Nahda for Industries (Cairo, Egypt), which paid $15 million for a license in Qena
• North Sinai Cement (Dooki, Egypt), with a bid of $8 million for the Sinai license
• Egypt Kuwait Holding Company (Giza, Egypt), which won the final license for $4 million for a factory in Asyut

However, in November 2009, Egypt's licensing committee decided to cancel Cement Wadi El Nil's license as a result of delays in the startup of construction. Under the terms of the license bidding, each company was supposed to have its factory in operation within three years, but Cement Wadi El Nil had not started construction by November. Four other companies are in the same position and their licenses are under review, according to the IDA, with at least one other license likely to be cancelled. Cement Wadi El Nil has until late this month to appeal the decision.

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