CAIRO, June 17 (Reuters) - Egyptian cement maker Tourah Cement, a subsidiary of Germany’s HeidelbergCement , says it has suspended production because of financial distress caused by oversupply in the Egyptian market and is considering liquidation.
“Estimated cement consumption during 2019 will end at around 50 million tonnes while total capacity of all competitors stands above 85 million tonnes,” Tourah managing director Jose Maria Magrina said in a letter to employees last week and seen by Reuters.
“This extra capacity is more than the total consumption in one year of countries like Italy, Spain, Morocco or South Africa,” Magrina wrote.
Tourah confirmed on Monday that the statement was accurate, and that production had already been suspended.
Tourah had accumulated 800 million Egyptian pounds ($47.75 million) of debt, and its management was now contemplating the company’s final liquidation, the statement added. Tourah, Egypt’s first cement company, was founded in 1927.
A rival firm owned by the Egyptian armed forces, El-Areesh Company for Cement, opened a 13 million tonne per year cement plant in early 2018 at a cost of $1.12 billion, adding capacity to an already bloated market.
A Chinese contractor helping build El-Areesh’s plant at Beni Suef 120 km south of Cairo said last year that the new plant was the biggest to be built in a single phase anywhere in the world.
The Tourah statement said the additional production had forced cement makers to drop prices to below cost.
Cement makers have also been hurt by increasing fuel prices as the government reduces subsidies.
Egyptian cement makers have been eyeing Libya and Sudan as potential export markets that could absorb some of the excess capacity, but instability in both countries has dampened demand. ($1 = 16.7525 Egyptian pounds) (Reporting by Patrick Werr, editing by Louise Heavens)