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French Version

Cement company pours hopes into upgraded production facility

Cimenterie nationale has eye on competitors emerging in Gulf

Cimenterie Nationale (CN), Lebanon's second-largest cement producer, is investing $100 million to upgrade production, as a regional spike in prices has the sector flush with revenue. An upgraded production facility in Chekka, to be completed in May, will allow CN to produce 90 percent more clinker, an intermediate product in cement manufacture.

CN commenced the upgrade in summer 2005, as cement prices in Iraq spiraled to $135 per ton. Cement also goes for $130 per ton in Syria - double the price in Lebanon. The Lebanese market had settled at a price level of about $75 per ton, but Lebanon's three major producers - CN, Holcim and Sibline - agreed to cut the per-ton price by $10 from September 2006 until September 2007 to spur reconstruction after the summer 2006 war with Israel.

The war put CN's investment two-and-a-half months behind schedule, as the project's German engineers and Croatian builders fled the country three days after the bombing began, said Pierre Doumet, general manager of CN.

The increased capacity should allow CN to produce 2 million tons of cement this year, up from about 1.7 million tons last year.

Holcim, Lebanon's market leader, has a 2.2-million-ton annual capacity, although its sales totalled 2 million tons in 2006, said Jamil Bou Haroun, Holcim's business development manager. Neither Holcim nor Sibline plans to increase capacity, said Bou Haroun and Sibline general manager Nicholas Nahhas.

CN says it decided to undertake the investment not to fob off as much cement as possible now on Syria and Iraq, but because CN knows the current windfall will not last long. Saudi Arabia and other Gulf states are throwing up their own factories, which will have much lower costs - thanks to cheap fuel - and could bite off a large chunk of CN's export market. CN's production costs should decline by up to 10 percent after the upgrade, with savings in fuel efficiency, maintenance and spare parts, Doumet said.

"We have the bonanza now, [but] we need to think long-term," he said. "We are seeing a lot of cement companies popping up in the Gulf states and Saudi Arabia. It's a big threat - we are shaking in our boots with fear. If we're not really, really 100-percent efficient and state of the art, we'll have a very tough time competing.

"We're not looking at yesterday, today or tomorrow - we're looking at two years down the road. Our goal is not to produce as much cement as possible - it's to produce as efficiently as possible."

The main cost for Lebanon's producers is fuel - CN and Holcim fire their factories on petroleum coke they import from the US and elsewhere, while Gulf competitors have access to abundant natural gas at minimal cost.

Egypt's cement companies also have lower fuel costs, and Turkey's producers complete the line-up of formidable rivals faced by Lebanon's producers in export markets.

The upgrade, which CN is financing with loans granted at an advantageous rate by a consortium of Lebanese banks, will also lessen the factory's impact on the surrounding environment, Doumet said.

The ongoing political turbulence should not affect the investment or the cement business, which accounts for about 10 percent of Lebanon's total exports, Doumet said.

The industry is one of the few natural-resource industries where Lebanon has a natural competitive advantage - the country has abundant, high-quality limestone, convenient deep-water ports and a wealth of know-how.

Beirut 17-01-2007
The Daily Star

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