- Business Opportunities Lebanon
- Business Opportunities Morocco
- Business Opportunities France
- Business Opportunities Jordan
- Business Opportunities in Mediterranean
Music Shop
Iloubnan - information portal on Lebanon
- Rental France
- Web agency France
Sole Agent for Philips & Whirlpool in Lebanon
Nsouli - Jewelry Lebanon
- Real Estate Lebanon
- Swiss watches manufacturing
- André Marcha
- Car Rental Beirut Lebanon
- Swiss made watches
- Car rental Tunisia

Back to archives
Back to news
French Version

Lebanese cement makers profit from regional boom - but for how long?

Local consumption is flat, and export markets are getting tougher

The regional construction boom has caused the price of building materials to skyrocket, allowing Lebanon's stagnant cement industry to rebound from a period of decline caused by a dip in local consumption rates.

Deliveries by Lebanese cement companies increased by 4.04 percent in the first half of 2005, compared to the same period in 2004, according to the Bulletin of Indices.

Nicholas Nahhas, general manager of Sibline-1, told The Daily Star that demand for Lebanese cement had risen by 25-29 percent, with the majority of the change coming from foreign markets. Of the 4.5 million tons of cement produced in Lebanon in 2005, 500,000 tons were exported to Iraq and 1 million to Syria.

Jamil Bou Haroun is general manager of Holcim, which reported $10.9 million of profits in the first half of 2005, compared to $12.4 million in 2004.

"We estimate that the local market has been maintained or perhaps fallen a little since 2004, which is an achievement given the current political situation," he said. "Officially the Lebanese market consumed 3,000,000 tons of cement last year, 300,000 of which were smuggled over the border to Syria, so the real number is around 2.6-2.65 million tons".

The Syrian government has put a cap on cement imports and charges a $30 customs fee for every ton that crosses the border.

Meanwhile, the output of its state-run cement company has remained flat since reaching peak production of 5 million tons in 2004, prompting Syrian imports of Lebanese cement to buck political tensions and rise from 300,000 tons in 2004 to 500,000 in 2005.

Iraq is also a profitable market for Lebanese cement, accounting for a third of Lebanon's export volumes in 2005. Since the beginning of Iraq's reconstruction project in 2003, the cost of a ton of cement has swelled from $20 to about $125, as most of the country's 13 state-owned cement plants are operating at about 25 percent capacity, if at all.

But Pierre Doumet, general manager of Cimenterie Nationale, is "not so bullish about last year's numbers" because the high cost of transporting cement to Iraq, $40-$50 per ton, slashes profit margins on shipments to that country.

Doumet said the industry needed to invest in more efficient production capacities over the next two to three years. He estimated that almost $150 million worth of resources would be funneled into Lebanon's cement sector to decrease production costs stemming from high fuel and electricity prices; $80 million will be spent by Cimenterie Nationale alone. Bou Haroun says Holcim will spend $10 million dollars in 2006 to replace two of his company's generators with more energy-efficient ones.

Holcim and Cimenterie National both generate their own power, while Sibline spends about $6 million a month on electricity bills. These expenditures make it almost impossible to compete with the cheap cement flooding the market from Iran, Saudi Arabia, and most importantly Egypt, where annual output exceeds local consumption levels by 15 million tons.

According to Doumet, electricity in Lebanon costs eight times as much as in Egypt. Lebanese cement manufacturers will also have to contend with Saudi Arabia and Iran in the future, since both countries are "furiously building new plants" to increase export capacity.

"You need to look at the big picture," Doumet said. "Since energy costs are such a large cost component in our business, and all of our neighbors who are competitive threats generate their own electricity, we have to be on the cutting edge of new technology."

Throughout the 1990s Lebanon's cement sector went through a restructuring period, when about $600 million was funneled into the industry with a view to upgrading technology and raising capacity to meet the country's reconstruction needs.

Bou Haroun said that from 1999-2001, his company was forced to undertake layoffs when local construction projects began to decline.

"After we closed a lot of plants we were forced to downsize," he explained.

Experts forecast no increase in local consumption rates, which peaked at 4 million tons in 1995.

"New investment should not go to increasing production because the rising demand in neighboring markets is only temporary," said Doumet. "Even production levels in Iraq and Syria will grow, so in relatively good times like these you have to invest to increase efficiency so you can survive when the market slumps, which is inevitable in three to five years."

Beirut,04 10 2006
Lysandra Ohrstrom
The Daily Star
ebizproduction is supported by "Le Conseil Régional de la Région
Provence-Alpes-Côte d'Azur".
| Home | Version française | contact@1stmediterranean.com | © ebizproduction - Web Agency - 2001/2008 |