Lebanese cement exports to Syria and Iraq have fallen drastically as companies find it increasingly difficult to ship their products overland through Syria, which is facing security disturbances. “The situation is now critical because the sales are decreasing radically to Egypt and Syria,” Pierre Doumet, general manager of Cimenterie Nationale told The Daily Star.
The company used to export 97 percent of its cement to Syria, Egypt and Iraq. In 2007, it invested $100 million in a production facility in Chekka in anticipation of increased regional demand. “Now, we’ll have to export much further away. Cement travels with difficulty. It’s not a value-added product. We have to travel further and sell it cheaper. We’re now exporting more to Cyprus and we’re looking at the markets in Spain and Italy – which are all under severe recession.”
Today, as Lebanon’s neighbors continue to experience turmoil, producers of cement, one of Lebanon’s largest export items, are now looking at ways to make up for lost business. And as exports through Syria dwindle, they see that regional competitors, such as Jordan and Turkey, are gaining ground as they are able to offer lower prices because of their geographic proximity and cheaper gas prices.
Lebanon produces 6.5 million tons of cement per year, with an average price of $92 per ton and with an annual domestic demand of 5 million tons, meaning 1.5 million tons need to be exported, no easy feat as regional unrest shows no signs of abating. But cement delivery in Lebanon mainly depends on the real estate boom in the country, which sometimes grinds to a halt in the event of security incidents. “Unrest in Egypt and Syria both started around the same time. Syria was not only an export market but also a transport route to Iraq.
Now it’s more complicated, especially with Syria’s export ban,” said Doumet, noting that even though his company continues to ship cement through Syria (while construction demand has almost completely stopped), higher risk has meant higher insurance and transport costs.
Compounding the problem of sharply declining exports is a stagnant and uncertain domestic market that doesn’t have the capacity to absorb all of the output. As Lebanon’s construction slows down, cement producers worry about what will come next. “We need to look at the outlook and the indicators: Stagnation of construction activity, uncertainties, and a lack of government spending on infrastructure.
These factors might lead to a decrease in domestic consumption,” said Jamil Bou Haroun, business development manager at Holcim, Lebanon’s largest cement producer. He said that although the domestic market is currently stagnant, he’s reluctant to increase exports due to regional unrest.
Sibline, which produces almost completely for the domestic market, has not seen a drop in demand, but the company’s CEO, Talaat Lahham, said that if regional unrest continues, increased competition domestically could affect his business. “The cement industry is getting a double-whammy,” said Assem Seifeddine, associate dean of the business school at the American University of Beirut. “The biggest real estate projects are in a freezing phase, and the liquidity in real estate has dried up significantly, and the prices of real estate have gone down. This gives less incentive for big projects to be done. We don’t have the euphoria of the real estate market like we did two years ago … The real estate market will probably take another two to three years to pick up again.”
He noted that until now, Lebanon’s cement industry has been able to turn to exports when domestic demand was low. But the regional turmoil is making this a less viable option. “Unfortunately, I don’t think things will improve in Syria anytime soon. If anything, things will probably get worse there.” Lebanon’s cement industry is no stranger to adversity.
The 15-year Civil War that ended in 1990 hurt the country’s three cement firms – Cimenterie Nationale, Holcim and Sibline. Holcim was particularly affected given that it has historically relied on the domestic market. Then, in the mid-1990s, cement sales spiked with the country’s post-war reconstruction and subsequent construction boom.
The industry saw a period of relative stagnation until around 2005, when Iraq’s post-war reconstruction gave Lebanese cement exporters a lucrative new export market. This lasted through 2010, when Indian and Pakistani cement companies began squeezing out their Lebanese competitors in Iraq, specifically CN, which exports the vast majority of its products and had until that point relied on Iraq as a reliable market.
Around the same time, some of Lebanon’s biggest export markets began experiencing instability with anti-government demonstrations, first in Egypt, then in Syria, which have continued until now and has dealt a severe blow to all exports these countries. “Maybe Libya will surprise everyone and will pick up sooner than we think,” said Seifeddine.