Introduction To The Ethiopian Cement Market

Cement is by far the most important construction material manufactured in Ethiopia accounting for about 90% of the gross value of production of non-metallic building materials. The cement industry is a pioneer modern manufacturing industry in Ethiopia, whose origins dates back to the nineteen thirties.

The first cement plant to be established in Ethiopia was Dire Dawa Cement and Lime Factory. It was built by the Italian occupying forces in 1938 to expand infrastructure development for their colonial needs. It had a capacity of 120 tonnes of clinker per day.

Another cement plant located in Massawa (now part of Eritrea) was built before World War II and had a capacity of 45 tonnes of clinker per day. It was dismantled in the early nineteen forties.

In response to the increasing demand for cement, the Addis Ababa and Massawa cement factories were established in 1964 and 1965, respectively, with 70,000 tonnes of clinker per year (tcpa) capacity each. The construction and commissioning of Mugher Cement Factory in 1984 allowed a rapid increase in capacity to 480,000 tcpa after a period of stagnation in the early 1980’s when output had levelled off at about 180,000 tcpa. Mugher Cement Factory (MCF), which was commissioned in 1984 with a capacity of 300,000 tcpa, doubled its capacity to 600,000 tcpa in 1990, with the construction of a second line. The above developments indicate the gradual growth of the cement industry in Ethiopia.

The Dire Dawa plant has been closed down after 50 years of operation. Currently, a major rehabilitation effort has now enabled production of 30,000 tonnes of cement per year. The Addis Ababa plant is over 35 years old and no longer produces clinker. The plant in Massawa (Eritrea) is no longer in Ethiopia, and it is of little importance in any case, considering its age and reduced capacity. The above considerations leave the Mugher Cement Factory as the major operational cement factory in Ethiopia at present. Recently, the factory has achieved commendable capacity gain on the final product (i.e. cement) ranging from 20% to 30% as a result of conversion from ordinary Portland cement to Portland pozzolana cement by adding pumice to clinker before grinding.

A new cement project has been commissioned, and is already on stream, at Messebo near Mekele, some 770 km north of Addis Ababa in Tigray Regional State. The Messebo Cement plant has a nominal production capacity of 600,000 tcpa and came on stream in May 2000. It is understood that the original plan was that the plant would start at 70% of its theoretical capacity and increase output by 10% per year until it reached full capacity utilisation by the year 2003.

Because of its geographical location, the Messebo plant is expected to concentrate on the northern part of the country (covering about 33% of the market) while Mugher focuses on Addis Ababa, central, eastern, south and southwestern parts of Ethiopia as its target market. However, past consumption data and expected future economic growth suggest that Mugher Cement Factory alone cannot fulfil the cement demand of the remaining 67% of the market without adding new capacity. This is discussed in detail in section 4.0, however it is understood that the Messebo plant has been unable to sell its output due to a combination of uncompetitive pricing and lack of market in its northern region. To date (mid-2001) a total of 110,000 have been produced in three short production runs, each of about 30 days duation. Currently the plant is shut down and there are reported cash flow problems.

Current Industry Structure

According to the present organisational structure, the management of Mugher Cement Factory is given the responsibility of administering three other factories apart from the MCF proper. The first one is Addis Ababa Cement Factory (AACF), which was established in 1964 and merged with MCF as of 1995/96. This plant is located within a highly congested area of the city and it was decided to stop production of clinker mainly due to environmental concerns. AACF now operates as a grinding mill getting clinker from MCF and producing Ordinary Portland Cement. The other plant under MCF management is Senkele Lime Factory, which is located at 130 km from Addis Ababa and produces about 4,500 tonnes of lime per annum. The third plant is Dire Dawa Cement and Lime Factory (DDCF), which is over 60 years old. Since January 2000, the government has given MCF management a provisional responsibility of administering the DDCF. Major rehabilitation work, led by MCF technical personnel, has been completed to reinstate production to about 30,000 tcpa.

THE CURRENT SUPPLY OF CEMENT

Domestic Production and Capacities

At present, the Ethiopian cement industry has been dominated by the three state-owned factories namely Dire Dawa Cement and Lime Factory, Addis Ababa Cement Factory and Mugher Cement Factory. While Addis Ababa and Mugher cement factories produces only cement, Dire Dawa Cement and Lime Factory, however, produces quick lime and hydrated lime in addition to cement.

The table below summarise production and current capacities:-

Table 4.4.1 Volume of Cement Production (in tonnes)

Manufacturer 1995/96 1996/97 1997/98 1998/99 1999/00 Capacity

(tpa)

Dire Dawa Cement and Lime Factory 12,274 10,798 13,262 8,921 4,976 33,403

Addis Ababa Cement Factory* 52,060 83,882 92,465 119,821 120,602 900,000

Mugher Cement Factory 553,314 678,653 670,749 638,266 690,962

Messebo - - - - 50,000 663,158

Total 617,648 773,333 776,476 767,008 866,540 1,596,201

Note: * As of recent years, Addis Ababa Cement Factory serves as a branch cement milling plant of Mugher Cement Factory.

Source: Dire Dawa, Addis Ababa and Mugher cement factories.

Dire Dawa Cement and Lime Factory (DDCF) had a 40,000 tonne per annum production capacity. It had been closed down for about four years (from 1987 вЂ" 1991) due to technical problems and shortage of spare parts. Since end of 1991, the production of cement continued erratically around 9,000 tpa to 13,000