The recent shift to a market-based exchange regime has added another layer of complexity, impacting businesses across the board, including the cement industry. Prices and supply chains are feeling the effects, prompting the government to introduce market-based cement pricing. This move allows manufacturers to set their own distribution prices, aiming to stabilize the sector.
Adding a new twist to the market, Lemi National Cement Factory, the largest cement production facility in Ethiopia, has officially entered the scene. Many are now watching closely to see how this new player will influence cement supply and pricing, with expectations that it will bring significant changes to the market dynamics. In fact for the time being the floating system continue to make the local currency value to be depreciated and which again posing deduction of the nation Growth Domestic Product but sooner it is expected to be stabilized.
The Lemi Cement Factory has daily production capacity of 10,000 tons of clinker, translating to 15,000 tons of cement per day. “Our facility is designed to meet Ethiopia’s growing demand for high-quality cement. This scale of production ensures a consistent and reliable supply, contributing significantly to the construction and infrastructure aspirations of our country and the region” said Biru Wolde, the group CEO of East African Holdings.
Combined with its production line in Dire Dawa, which produces 3,500 tons of clinker per day the Lemi National Cement is redefining the dynamics of Ethiopia’s cement market by increasing the national supply by 50%. This scale of production not only addresses current demand but also enables the factory to support Ethiopia’s ambitious infrastructure and industrialization projects.
According to studies the availability of abundant limestone which is a core input for cement production puts the nation in advantageous position. It can be obtained particularly in the midlands and semi low land areas of the country. The areas are conducive for constructing high ways for transporting products from factories to the markets.
Nevertheless, cement production in Ethiopia remains an expensive endeavor, with manufacturers grappling with rising energy costs, unreliable coal supplies, and the burden of importing costly machinery.
These challenges ripple through the market, pushing up prices and making cement less affordable for everyday construction projects. Retailers also point to ongoing supply shortages, price fluctuations, and logistical challenges as major issues impacting the cement market.
“We are optimizing operations by adopting green energy through PanAfrique Green Energy, reducing reliance on coal and cutting costs,” said Biru Wolde. “This shift also aligns with our commitment to sustainability by lowering carbon emissions.”
In this regard the ongoing exploration and exploitation of renewable energy sources such as hydro power, geothermal, wind and solar will play pivotal role in liberating industries from carbon based energy dependent on the renewable one further support the sector production sustainability.
Biru noted that due to various reasons cement prices in Addis Ababa ranged between Birr 2,000 and Birr 2,900, have now stabilized at around ETB 1,500. He attributed this change to the company’s strategy of supplying large quantities directly to retailers and implementing a post-purchase management system to ensure benefits reach consumers, fostering a fairer market.
Lemi National Cement is investing in cutting-edge technology to boost productivity, reduce waste, and maintain consistent product quality. By automating processes and using advanced equipment, the factory achieves high efficiency while keeping costs in check. The company also prioritizes workforce development, ensuring skilled professionals drive operational success. This is reflected in the engineers sent to China for training before the plant became operational. “These efforts strengthen Lemi National Cement’s competitiveness, support Ethiopia’s industrial growth, and ensure the delivery of top-quality products,” he added. It also installed well and modernized west management plants to let it in improved sewerage system and make the production activities environmental friendly.
In addition to that, the industry created good working environment to workers and pays relatively better wage. Economic theory suggests that when demand outpaces supply, prices naturally rise. This has been clearly evident in the Ethiopian cement market, where high demand and limited supply have driven up prices. One of the key expectations surrounding Lemi National Cement is that its entry into the market will help reduce prices by increasing supply and competition.
“To bolster our capacity and contribute to Ethiopia’s future growth, we plan to add another production line with similar capacity.
This expansion doubles our output, enabling us to better meet the nation’s growing demands. With a strong focus on quality and innovation, this strategic move reinforces Lemi National Cement’s role as a key player in Ethiopia’s development goals,” said Biru.
According to the Group CEO, Lemi National Cement is playing a crucial role in stabilizing cement prices in Ethiopia by ensuring a consistent and reliable supply of high-quality cement. “We are already seeing the positive impact, as there has been noticeable price stability recently,” he said. By maintaining a steady flow of quality cement, the company helps reduce price fluctuations, bringing more predictability to the market.
As mentioned above the government is aggressively engaged in attaining economic development through transforming the economy from agricultural led in to the industrial one. To realize these created enabling environment for the expansion of manufacturing. It constructed industrial parks which the construction sector played pivotal role. One of the key ingredients for construction is cement production. Hence, strengthening the sector is essential.
The commitment of the Ethiopian government for attracting foreign investment and introducing laws to that end is a clear step toward realizing its vision of industrial growth and self-reliance. This move has given a boost to the cement sector, which has become a vital part of Ethiopia’s rapid urbanization and ambitious enhancing infrastructure projects. From roads to housing and industrial parks, cement is at the heart of the country’s endeavor for economic development.
In addition, cement production broadens the value chain from production to wholesalers, retailers, and small-scale distributors. Transporting cement products also creates job opportunities for various transport firms.
The booming of the construction sector also stimulates the revival of quarries, sand producers, and daily laborers engaged in construction works.
Yet, the journey hasn’t been without hurdles. Supply shortages, price hikes, and a heavy reliance on imports have made cement costly and out of reach for smaller projects, leaving many to wonder how long these challenges will persist. The increment of the price of imported inputs used for cement production and the shortage of hard currency for long hampered the sector from producing in its full capacity.
While the government continues to prioritize industrialization, the market remains concentrated in the hands of a few major players, struggling to keep up with soaring demand. In addition the involvement of illegal brokers in the trade value chain and hoarding the products to get opportunity to supply in expensive price for long affected the sector activities and the market.
“The government’s focus on industrialization, coupled with large-scale construction projects, has significantly driven up the demand for cement,” said Biru Wolde, the group CEO of East African Holdings. “This provides an excellent opportunity for manufacturers like our Lemi National Cement to grow and contribute to Ethiopia’s economic transformation.” He highlighted that the industry enjoys several competitive advantages, including Ethiopia’s abundance of raw materials, such as limestone, which enables cost-effective production. Additionally, the booming construction sector and Ethiopia’s strategic location in East Africa open doors for both domestic and export markets. In line with these, the availability of labor at fair prices attracted both local and foreign investors to involve themselves in the sector’s business.
However, Biru acknowledged the challenges that manufacturers face. High energy costs, inconsistent coal supply, intermittent power outages, and logistical inefficiencies remain major hurdles. Currency fluctuations and reliance on imported equipment further intensify financial pressures, demanding innovative strategies to overcome these barriers. Bureaucratic bottlenecks rampant in the service provision public offices also made the sector’s production and distribution sluggish
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD WEDNESDAY 18 DECEMBER 2024
