Derba Cement, one of the subsidiary companies of MIDROC Ethiopia, is to undertake a massive expansion project at its cement plant in Derba at a cost of 300 million dollars.
Haile Assegidie, CEO of Derba Cement, told The Reporter that his company is planning to build a second plant in Derba, near Chancho town, 80 km north-west of Addis Ababa. Haile said the planned second plant will have an installed capacity of producing 25 million quintals of cement annually.
According to Haile, the total cost of the second plant is estimated at 250-300 million dollars. The construction will take 18-24 months. “Once we finalize the negotiations and an sign agreement with the contactor and the financiers it will take us a maximum of 24 months to finalize the construction of the second plant,” Haile told The Reporter.
Derba Cement had built the first cement plant at a cost of 351 million dollars. The first plant has an annual production capacity of 25 million quintals. Haile said the factory is currently producing and selling 20 million tons of cement annually. “We do not produce for six hours everyday because of power interruption. But since Gilgel Gibe III started generation we believe that the problem will be resolved,” Haile said.
Derba Cement is holding talks with the Chinese construction firm—China National Building Materials Company— which had built the first cement plant. The first plant was inaugurated by the late prime minister Meles Zenawi and Sheik Mohammed Hussein Ali Alamoudi, owner and chairman of MIDROC Ethiopia in February 2012. Derba Cement played a major role in stabilizing the sky-rocketing cement price at that time. “Everybody knows the situation in the cement market before we started production,” Haile said.
Back then the Ethiopian-born Saudi billionaire, Mohammed Al Amoudi, invested 100 million dollars in the Derba Cement project. The remaining 251 million dollars was secured in the form of loan from the Development Bank of Ethiopia, International Financial Corp (IFC), the World Bank Group investment arm, the African Development Bank (AfDB) and the European Investment Bank.
Haile said that his company is negotiating with the same financial institutions to secure financing for the construction of the second plant.
At the moment there are 20 cement factories in Ethiopia with a total annual production capacity of 15 million tons. The country’s annual cement consumption stands at nine million tons
Asked how Derba intends to build a second plant while there is an excess production capacity, Haile said his company would be cost efficient if it uses the existing infrastructure like operation line, road and houses. “We have to be cost leaders. If We are cost leaders then we will be price leaders,” Haile said.
With regard to the fierce market competition, Haile said the situation will change in the coming few years. “If we successfully implement the second GTP, the demand for cement will increase and the market situation will change for the better.”
Derba also has a gypsum manufacturing plant with an installed capacity of 2000 quintals per day. Furthermore, it to be remembered that Derba had imported 1000 Volvo trucks at total cost of 200 million dollars.