In the wake of years of heavy public spending on infrastructure, a wave of new investments in Algerian cement production is set to help the North African country meet its growing demand for the construction material.
The 2014 Global Cement Directory puts Algerian cement manufacturing capacity at 21m tonnes per annum (tpa), which would place the country just inside the top 20 cement producers worldwide based on 2011 figures from the US Geological Survey.
However, demand outstrips local output by up to 5m tpa, requiring the country to import the shortfall. In 2013 the value of cement imports stood at around €290m, up 26% on 2012 figures.
On-going major infrastructural investment and the government's efforts to address the housing shortage are increasing pressure on cement consumption, which is growing at an annual rate of around 5%. The state's decision last year to bring in foreign contractors to help address the housing deficit is set to further boost demand.
State-owned facilities to expandHowever, planned major investments in new domestic cement capacity by both local and foreign companies should eliminate the cement deficit in the coming years. Most notably, state-owned cement producer Groupe Industriel des Ciments d'Algerie (GICA), which operates 12 cement factories, is set to more than double its production capacity by 2017, from 11.5m to 26m tpa, according to an announcement in March.
The plans involve setting up 10 new production lines at an investment cost of around AD150bn (€1.4bn). Four of these will be located at entirely new plants, including a 2m tpa factory in Oum El Bouaghi province in the east of the country, a 1m tpa facility in Bechar province in the south-west and two other factories in Relizane and Tamanrasset. The remaining six will be new lines at existing production facilities.
In addition to these plans, in February the local media reported that state-owned Annaba Port Company (l'Entreprise Portuaire d'Annaba) was undertaking consultations regarding the construction of a cement factory based out of a boat to be moored in Annaba harbour on the country's north-eastern coast. According to the reports, the factory would have a production capacity of 500,000 tpa and could be completed by the end of the year.
Private sector investments growingPrivate and foreign investors are also working to increase national production capacity. Cevital, a major private conglomerate, has plans to enter the market through the construction of five cement production lines across two factories in Constantine and Bouira provinces, with a combined capacity of around 10m tpa.
In February, South African cement producer PPC announced it is set to acquire a 49% stake in the Hodna Cement Company, a private Algerian firm that is building a 2m tpa cement facility in Hodna near Setif, of which PPC will take management control. The plant is due to be completed by the end of 2016 at an investment cost of around €250m. In explaining its decision to enter the Algerian market, PPC cited factors such as favourable production costs due to "affordable gas prices", the relatively high GDP per capita by African standards, the good transport and logistics network, and likely strong demand as a result of the housing deficit, which it put at around 1.2m units.
Additionally, GICA and French construction materials major Lafarge are planning to add another production line at their jointly-operated cement factory at Meftah, and Lafarge and local company Sagremac are together building a cement production facility in Biskra province, due to enter into operations next year. The plant will have an initial production capacity of 2.7m tpa, to be eventually raised to around 6m tpa.
Lafarge operates two wholly-owned cement factories in Algeria with a combined capacity of around 8m tpa in addition to the Meftah plant. Last November Lafarge opened a construction materials research centre in the Rouiba industrial zone outside Algiers, the first of its kind in the country. The laboratory, which was built at a cost of AD180m (€1.7m), is Lafarge's fourth such facility globally. GICA also reportedly has plans to launch research and development projects with several Algerian universities.
There is further scope for new entrants to gain a foothold as well, following an announcement by Egyptian company ASEC Cement on March 20 that it will sell its 35% stake in the Zahana cement factory in Mascara province, which it has managed on behalf of GICA since 2008.
As a result of the various expansion plans in place, in February Minister for Industrial Development and Investment Promotion Amara Benyounes said the country would cease importing cement within three or four years. By 2022 the authorities estimate national production capacity will have reached around 42-44m tpa, allowing for large-scale cement exports in addition to satisfying local demand.
© Oxford Business Group 2014
