Mugar Cement and Messobo Cement factories have sent letters
to the Ministry of Finance & Economic Development (MoFED) requesting that
the government hold import of cement claiming they can produce enough to meet
its demand.
Both companies, which have finished their respective
expansion plan adding a combined 1.7 million tonne to their annual production
of 1.4 million tonne, sent the letter copied the letter to the Ministry of
Industry (MoI) last week.
With a huge infrastructure planned and local cement
factories unable to meet its demand the government has been importing cement in
a competitive bid through the Public Procurement and Disposal Agency (PPDA)
established in 2010. Concluding a
contract with Italian and Israeali companies, the PPDA purchased 400,000tn of
Ordinary Portland Cement (OPC) at a cost of 34.6 million dollars in August,
2011. Out this 250,000tn has already arrived at Djibouti port. The cement is
intended to be used for the construction of housing projects, road and sugar
factory.
However both the state owned Mugher and Messebo, which was
established in 2001 and has its plant in Mekele, 780km north of Addis Abeba in
Tigray Regional State, claim they have enough supply in stock.
“We are sitting on
the mountain stock,” an official of Mugar, who is not authorized to comment,
told Fortune.
The national demand for this fiscal year was estimated to be
around eight million tonnes, including the 213,941tn demand for the Renaissance
Dam, according to a recent study conducted by the Ministry of Industry
(MoI). This is 5.8 million tonne less
than the estimated demand set in the five-year Growth and Transformation Plan
(GTP) and three million tonnes less from the demand last year.
In a complete turnaround of a trend in the cement sector,
capacity of factories and supply has increased while demand went the other way.
The number of factories with a production capacity of three million, which were
trying to meet the 11 million tonne demand last year has gone up to 15 with a
capacity of 7.8 million tonne. There are five companies set to enter into
production this year bringing the total supply to 12.6 million tonne.
Notable among them is Derba Midroc, a 351 million dollar
factory, located 70km outside the capital in Sululta Town of North Shoa Zone,
Oromia Regional State. It is set to start production in January 2012 initial
daily production of 1,800tn.
While demand is decreasing, the price of cement has also
seen a major decline with bag of 50k cement being sold at an average of 300 Br.
This is significant decrease from the 500 Br price tag in May and April this
year.
However, there is no clear reason why demand has decreased
while experts venture different theories.
Some experts argue that private sector construction has
decreased due to the price of reinforcement bars, which are complementary with
cement, increasing by at least 70pc.
Trade is also another factor, according to Tsedeke Yihunie,
manager of Flinstone Engineering.
“This might be due to the steps taken to formalize trading,”
he told Fortune. “As people slowly adapt to the change trade slows down
reducing the rate at which money changes hand.”
However, there needs to be a research done to exactly know
what is affecting the demand side, according to an expert at the MoI, who is
not authorized to comment.
“But it is likely that there is more supply than demand,” he
told Fortune.
This decline has become worrisome for Mugher, which until
recently limited its supply to the privates sector by supplying to the
government.
It is revising it market strategy and planning to open its
doors to the private sector, according to the source in Mugher. The factory
used to prioritizes its supply for government projects, investors, real estate
developers and NGOs respectively.
“The board of the factory is to meet on Monday, November 21,
2011, to make a decision on the matter,” the source told Fortune. “There will also be a discussion on reducing
price.”
A 50kg-bag of Mugher cement was selling for 355Br in the
market while Messobo’s price stood at 320 Br on Wednesday, November 16, 2011.
http://addisfortune.com
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