Cement prices fall like a ton of bricks

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Factory price of cement will see a significant plunge when the mega Derba MIDROC

Cement factory begins production. Not only is it the single largest private investment in the nation it’s also the largest factory in the country with the ability to produce 80,000 quintals of cement per day. It is expected to flood the cement market that has already lost momentum for various reasons and reduce prices by up to 40 percent.  
Today price of cement is no more as high as just three months ago when a bag of 100kg was sold as high as 480 birr.  It is now available for 200 to 230 birr per bag.
The factory, which will be inaugurated today in the presence of high government officials has already began producing  two types of cement, PPC and OPC as of January 29, 2012.
A Huge Step
According to an economics expert, a thriving cement industry is vital for any country to develop its economy. For a one percent growth in Gross Domestic Product, there is a demand of 1.2 percent in cement, argues the economist.  
The commencement of production by Derba MIDROC Cement Factory means for the sky rocketing cement market of Ethiopia, fueled by the imbalance between demand and supply, a huge relief not only for the cement consuming sector but also for the government. The latter has embarked on major development undertakings that range from power development to road, to housing development, university constructions and hospitals throughout the country. 
A Different Kind of Factory
Derba MIDROC Cement factory is one of the most sophisticated pieces of engineering the country has ever experienced signaling that Ethiopia is entering a new industrial era.
Parts of the factory, with the capacity to produce 2.5 million tons of cement per annum are imported from Germany and France. The installation was carried out by China National Building Material. 
What makes this factory state of the art  and world class is not only its dust emission levels which are 25 milligrams but also its power consumption alternatives. It can work with by products like old tyres, worn out papers and plant remains, in addition to the traditional source of energy like coal, heavy fuel and electricity.
The 52 year old Indian consultant, Bedri Vencatesh who has spent almost half of his life as a consultant for similar types of projects has no doubt that the factory is engineered at a very high quality.
“It is the latest of its kind in the globe. From crushing machine to the mills, from computer assisted control center to laboratory, the factory is equipped with the latest technology of our time,” explained Bedri, the Deputy General Manager of Holtech Consulting, an Indian consulting firm, when a crew of journalists paid a visit to the factory site in the early last December.
Derba MIDROC has built its own substation and transmission grid all the way from Inchini to the factory site, which is 49Km long, at a cost of close to 250 million birr. The factory is supplied with 51 mega watts of power from Ethiopian Electric Power Corporation.
What is most striking visiting the factory is the conveyor belt stretching 6.4 km from the crusher to the mill which is built in a rugged, barren desert like landscape. Water has to travel 17 km to reach the factory.
The factory has three mills, each with a capacity to mill 125 tones of clinker per hour.  Derba MIDROC factory which lies on 123 hectares of land was completed in 38 months. It collects its raw material from Mugher valley on 250hct.  With a production capacity of 2.5 tons annually, the factory will create more than 20 thousand job opportunities in its full staff capacity in the production and distribution area according to MIDROC Executive Director of Major Investment Projects,  Ato Haile Assegidie. While under construction it has created 5,000 jobs for Ethiopians and 1,500 Chinese.  
Creative Business
In order to assure door to door delivery, the factory has established Derba Transport which has already bought 1,000 trucks at a cost of over 211 million dollars. Out of the total number of trucks 600 are ready for use while 170 are at the port of Djibouti, according to Haile Assegidie.
“If we are not able to deliver cement to our customer in any part of the country within five days up on payment receipt, we will financially compensate our customer for the inconvenience created,” promised Haile.     
Huge Investment
Derba MIDROC cement factory is the first project to attract loans from large international investors. 155 million of the 200 million dollars it received came from abroad. The African Development Bank loaned it 55 million, 45 million came from the European Investment Bank, 55 million from International Financial Cooperation, the private arm of the World Bank Group and 60 million dollars from the Development Bank of Ethiopia. The owner of the ultramodern cement facility, Ethiopia’s international business tycoon, Sheik Mohammed Ali Al-Amoudi, has contributed 151 million dollars from his personal equity.
According to Haile Assegidie, the company will also be rewarded because it is using technology for reducing carbon emissions. Its green technology is worth four to five million euro per year.
Though it was originally planned to be a 351 million dollars project, it has now reached close to 600 million dollar with three additional companies created under its umbrella;  Maya PP Bag Factory, Derba Lime and Chemical factory and Derba Transport. The finances required to expand the cement factory in to four subsidiaries came from the pocket of Sheik Al Amoudi.
The bag factory which costs close to 25 million dollars has the capacity to produce 80 million bags out of which 50 million are to be used  by Derba Cement factory itself and the balance brought to the market. 
The project has already consumed 452 million dollars out of the total 600 million dollars budget.
Community Impact
Located about 75 kilometers in the North West of Addis Ababa in Oromiya Regional State at Abay Gorge, one of the most abundantly gifted with limestone deposits; the factory is making a big impact on the area. 
A new road network has been developed along with a medium size hospital with ten beds at a cost of 3.5 million birr.  Prior to this project development, the area had a single heath post, according to information obtained from residents of the area. Two other primary schools are in the pipeline though the local administration was unable to come up with a proposal. The project office told journalists that the factory will provide 20 thousand birr per month for the hospital’s recurring budget while it keeps aside 10 thousand birr for each schools as part of their corporate social responsibility program. The raw material extraction area has also enjoyed 141Km long and seven meter wide bridge over Mugher River.  
The factory has also established the first cement training institute of the county which is expected to enroll 50 fresh graduates in electrical, mechanical, industrial and information technology.
Background
In this Ethiopian fiscal year, seven cement factories are expected to commence production of which five are new projects and two are expansion projects creating an additional supply capacity of 4.8 million tons. The government estimates that by early July, 2012 the country may have cement supply capacity of 12.61 million tons. The actual demand for the cement in the country is only eight million tons.
There are 37 cement projects in the country which are active, under construction or planned.  Out of which 14 are local investors, one is a joint venture and the rest are foreign based investments. Out of the 37 cement projects, 34 of them are new cement projects.
The Ethiopian government has planned by the end of the Growth and Transformation Plan in 2015 to increase the cement production to 27 million tons annually. By then the per capita cement consumption will increase from the current 35 kilogram per person to 300 kilograms.  It also plans to make operational four cement expansion projects and eight new cement factory projects by 2015.
Since more than 80 percent of the Ethiopian population lives in the rural part of the country in a house made of wood and mud roofed by grass, the future of cement industry remain bright despite the current down turn in price.