Beware of Egypt's smokestack reshoring as Cement Exports Soar: Maguire
North Africa's second largest natural gas producer and its largest economy have increased the production and exports of several energy-intensive commodities in an effort to boost the growth of their industrial sector.
Egypt's exports of chemicals, fertilizers, and cement doubled from 2022 to 2024. They have also grown by 350% in the last year thanks to government initiatives aimed at promoting rapid industrial growth.
The increased output in Egypt coincides with a decrease in production in Europe of the same commodities. This trend highlights the growing trend of re-shoring smokestack industries away from areas of high energy costs and pollution control.
Egypt's heavy industries, which include crude oil refinement and natural gas processing, have created valuable jobs for the private sector in this 112 million-person country.
The climate impact of this sharp increase in energy-intensive, high-polluting goods is still largely unknown due to the relatively lax reporting requirements compared to other parts of Europe and North America.
EXPORT BOOM
According to Kpler ship tracking data, Egypt exported 9.7 million tons of cement and cement clinker in 2024. This was a record amount, nearly three times greater than what it shipped in 2022.
The exports of fertilizers from Egypt reached a new record in 2024. They increased by 70% from 2022, to 8,3 million tons.
The production data for Egypt's cement and fertilizer sector in 2024 has not yet been released. However, World Cement Association statistics show that Egypt ranked 11th worldwide with a cement output of 50 million tons in 2023. According to the International Fertilizer Industry Association, Egypt was sixth in 2023 for nitrogen fertilizer production (3.5 million tonnes).
The Egyptian government has identified both the cement and fertilizer industries as key drivers for economic growth.
For their continued growth, these and other industrial sectors are allocated fixed prices on their natural gas supply, which helps them control their costs.
The government has also recently lifted the subsidy on local fertilizer prices to boost margins.
To help boost sales, the government also sponsors trade missions to fast-growing markets in regional areas.
Blind Spots
It is not known how much pollution has been generated by the Egyptian industrial expansion due to the limited sharing of information between power plants, utilities, and heavy industry.
The International Energy Agency estimates a CO2 emission of 0.8-0.9 tons per ton of cement produced and 2.6 tons for every ton nitrogen fertilizer.
Egypt's massive industrial production is likely to have a significant pollution impact.
According to the Energy Institute in 2023, Egypt will emit 279 millions tons of CO2 as a result of energy production and industrial process. This is the highest among North African countries and the 25th biggest globally.
The emissions picture has been complicated by the production changes being made by international cement and fertiliser manufacturers, who are trying to increase plant efficiency and reduce emissions.
The recent shifts in the international operations footprint at Heidelberg Materials is a good example.
Due to low local sales, Germany's biggest cement producer will cease production at its Hanover facility in 2024. However, the Helwan plant near Cairo has been upgraded.
These moves allowed Heidelberg to better align its production levels in key markets by reducing production in shrinking areas while increasing production in growth areas.
The company was accused of moving high-polluting operations from the Eurozone, where emission standards are tightening, to other areas with lower pollution standards.
According to LSEG, the actual emissions impact of these changes has yet to be reported. However, data on Heidelberg's emissions footprint indicates that the company has consistently reduced its CO2 emissions, from around 73 millions tons in 2019 down to 63.2million tons in 2023.
The upgrades to Heidelberg’s Helwan facility include a waste heat recovery system, which is expected to reduce energy consumption and discharge levels.
Other firms may have emission and efficiency standards that are different from Heidelberg's.
The dynamic changes in Egypt's industrial landscape reveal a new, important climate risk arising from the rapid growth of North African industrial production. This is happening even as other sectors are shrinking.
These are the opinions of the author who is a market analyst at.
(source: Reuters)
