Challenges
Ethiopia cement industry is experiencing inadequate current demand and undercapacity production according to a presentation by made at the 7th Africa CementTrade Summit in Addis this month, by Gemechu Waktola, Ph.D; Assistant Professor, Adama Science & Technology University Team Leader, Ethiopia’s Cement Industry Development Strategy (2015-2025). The plan to revamp the Ethiopia cement sector covers the strategic period from this year to 2025.
The sector is also faced with inadequate regulatory enforcement capacity, as well as low environment, product and energy standards. There is also high concentration of market at the center, as well as inavailability of enough support industries for Ethiopia cement sector. Ethiopian cement markets are also characterized by inadequate product diversification and value addition; weak Remicon, Remitar, & other support industries. There is also inadequate current demand and high cement price.
In addition to experiencing a limited culture to use ready mix concrete (Remicon), the market is characterized by logistics and custom procedures that are costly, inadequate and inefficient according to the presentation at the 7th Africa CementTrade Summit 2015. Still, support institutions have a limited capacity in regard to transference of knowledge and technology. Weak Weak strategic R&D plans are therefore limiting development of related technologies.
Companies are also experiencing frequent power interruptions, limited access to funding, as well as a shortage of HR that is trained in cement technology and management. In addition to high electricity supply interruptions, Companies are having to use expensive imported energy – HFO and coal, and there is limited options in regard to source of power.
The Ethiopia’s cement industry only experiences insignificant import that is only limited to special cements, while exports are still insignificant and irregular according to the presentation.
Ethiopia, which only snatches 11% of production capacity share of the total in Sub-Sahara produces only 5.74MT and consumes 5.47MT.
The latest entrants in the Ethiopian cement market is Dangote and Habesha 1.4MT. Dangote cement plant, which is set to start operations come May, will has an installed capacity of 2.5MT of the total 11.2MT of installed capacity for all 18 cement plants (including the new entrants Dangote and Habesha).
Ethiopia cement market is, however, characteristic of high high energy production costs being experienced by companies in the region, managing a energy production costs of 50 – 60% of total production cost. (To this effect, many companies have announced desires to construct coal power plants to cut down the energy costs, as reported in other news).
Opportunities
The Ethiopia cement market is projected to grow, driven by GDP growth which is projected to grow to 9.12 in 2025. Growth of population is also likely to key into cement demand in relation to rise in housing demands. (Already, the country has initiated some mass housing projects in various places to quell housing demand). The population is expected to grow to reach 114.17m in 2025.
Launching of mega infrastructure projects is also likely to fuel demand of cement as a key driver in cement markets in Ethiopia. Other demand movers will be urbanization projects, regional housing plans in areas such as Tigray, Amhara, Oromia, and Addis Ababa.
Ethiopia cement market has, according to the presentation by Waktola, strong potential cement demand drivers, access to alternative energy sources that are diverse and sustainable, ability to overcome logistical challenges due to the upcoming/planned railway network, as well as a high potential to diversify use of cement (the country has already reported a number of high number of construction projects).
Local coal is also available for use by Cement industry, potential for support of firms by local government which is regarded as giving the industry strong support, and potential for collaboration with other stakeholders including universities and professional institutions. The country has a big coal reserve with deposits such as Moye holding up to 27 million tones. Biomass potential is the other optional source of energy that cement factories could consider, with the country experiencing various substantial residues (such coffee, solid waste, bamboo tree, chat and cotton) in various regions.
The alternative energy sources hold good potential clicker production levels; with solid waste, coffee husk, Sesame husk, cotton stalk, and saw dust all exhibiting a total amount of clinker of 3.7million according to the presentation.
Other opportunities include abundance of raw materials reserves, accessibility of carbon trading schemes, availability of young and cheap labor.
Recommendations on demand simulation measures
A number of recommendations have been proposed in relation to some demand induction measures on a long and short term.
The key targets in this include induction of demand for consumption of 12.22 MT of cement until 2020, to be used in replacing asphalt roads with cement concrete. Another key target will be increasing capacity utilization rate to 75% between 2015 and 2017, to be maintained at 80% until 2025.
The cement industry should also make strong cement associations by fully defining structures, roles, responsibilities and accountabilities for members and governments by end of this year. The country should also see to it that at least 10 joint projects in HRD, R&D and K&T transfer, energy improvement, and environmental protection are carried out each year.
In regard to energy, it is necessary that the industry replaces 60% of its energy (alternative energy to come from local coal, biomass, municipal waste) by 2025). The sector should also achieve a 10% thermal energy requirement from locally developed coal supply by 2020 and this should reach 30% by 2025. Alternative energy by should replace 20% of thermal energy requirement by 2020 , which should be increased to at least 30% at the end of 2025.
Other measures have been proposed to reduce logistical problems such as integrating Integrate cement logistics to railway lines, as well as increasing bulk delivery. There are also proposed HRD system and programs such as boosting supply of cement engineers & technology managers and ensuring 98% local experts are operating and managing the industry by 2025.
Green cement industry measures, average clinker substitution levels of 40% by 2025, and 680KCal/Kg of clinker by 2025 are some of the proposed measures to spur higher standards and regulation in the Ethiopia cement industry.
