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Ethiopian Cement Plants to Double Capacity Amid Construction-Industry Boom

Ethiopia will more than double its cement-output capacity after a new factory and two enlarged plants begin production later this year amid a building boom in the Horn of Africa country, a government official said.

The increase is expected to help end the need for imports by as early as next year, according to Shimeles Wolde, head of the Chemical and Allied Industries Directorate in the Industry Ministry. In recent years, Ethiopia imported about 1 million metric tons of cement annually to meet demand of about 8 million tons, Shimeles said in an interview.

“In 2012, there should not be that much need for importing cement,” Shimeles said today in Addis Ababa, the capital. “In 2012 or early 2013, supply and demand should be balanced.”

Ethiopia licensed 36 companies including Lafarge SA (LG), the world’s biggest cement maker, and Dangote Cement Plc (DANGCEM), Nigeria’s largest company by market value, to help it meet a target of producing as much as 27 million tons of cement annually by 2015, Shimeles said. Demand for cement may be met by the end of next year, when the completion of 22 projects takes annual production to 13.5 million tons from 2.7 million tons now, he said.

Ethiopia’s economy expanded an average of 11 percent over the past seven years, International Monetary Fund data shows. The government is targeting growth of as much as 14.9 percent over the next five years. A construction boom in Africa’s second-most populous nation, led by state investment in low-cost housing, roads, dams and universities, has left domestic supply short of demand, which is increasing at as much as 25 percent every year, Shimeles said.

‘Encourage Private Sector’

“We plan to encourage the private sector,” he said. “If there is a gap and the new investor does not come, we will invest. Otherwise it’s open to the private sector.”

Derba Midroc Cement, owned by Ethiopian-born Saudi billionaire Sheikh Mohammed al-Amoudi, plans to start operations at its new 2.5-million ton plant in September, said Chief Executive Officer Haile Assegide.

The expected completion in the next two months of expansions to state-owned Mugher Cement Enterprise and the ruling Ethiopian People’s Revolutionary Democratic Front’s Messebo Building Materials Production Plc will add another 1 million tons, according to Shimeles.

Plant Cost

Al-Amoudi’s plant near Chancho, 70 kilometers (44 miles) northwest of Addis Ababa, cost $351 million and is expected to reach full production capacity in the first quarter of 2012, Haile said in an interview on May 13. The International Finance Corp., the World Bank’s private lending arm, provided $45 million for the project, according to the company’s website.

“We are very confident, unless we have some disaster,” Haile said.

Derba Transport, an affiliate of Derba Midroc, has ordered 1,000 Volvo AB (VOLVB) trucks for $141 million that can each deliver 40 tons of cement to buyers from the factory, according to Haile.

Although it has large, “high-quality” limestone deposits and plentiful water supplies, Ethiopia’s per capita cement consumption of 35 kilograms (66 pounds) per year is very low by international standards, Shimeles said.

“For developing countries cement consumption is an indicator of development,” he said.

Even if the 2015 target is met, the 300 kilograms per capita consumption achieved will still be less than the global average of 390 kilograms, Shimeles said.

To contact the reporter on this story: William Davison in Addis Ababa via Nairobi at pmrichardson@bloomberg.net.

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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