Cement manufacturers have largely weathered the recent global economic downturn, continuing a strong secular trend that has seen total international production more than double over the past 15 years to 3.5 billion tonnes per annum in 2012. While emerging markets in Asia have driven much of the demand, new growth markets in Africa, Central Asia and the Middle East are expected to boost the industry in the coming years. Despite headwinds in the form of high energy costs and the rising cost of raw materials, resurgent investment in infrastructure and construction has sustained demand for cement.
One country in particular where strong economic growth is creating significant opportunities is Iraq. A market analysis conducted in early 2012 by Dunia Frontier Consultants suggested that as much as 60% of the approximately 20 million tonnes per annum (mtpa) demand in Iraq is currently satisfied by cement imports (primarily from Turkey and Iran, but also Pakistan, India, China, Jordan and Lebanon). Furthermore, projected double-digit GDP growth and major planned government investment in infrastructure and housing are expected to drive total demand for cement in Iraq to 26.5 mtpa by 2015 and 34.4 mtpa by 2018.
While downward price pressure from cheap Iranian imports continues to pose a problem for the domestic industry, several foreign firms have moved to take advantage of the expected strong demand in the coming years. As highlighted in this article, at least seven local and foreign investors are working with the Iraqi Ministry of Industry and Minerals to rehabilitate state-owned cement factories. Perhaps the most famous example to date is French group Lafarge SA, which operates three production facilities in Iraq. Lafarge acquired Egypt’s Orascom in 2007, which gave it control over the Bazian and Tasluja plants in Sulaymaniyah, and in 2010 it began a $220 million renovation of the state-owned Karbala cement plant.
The long-term prospects of the Iraqi market are certainly enticing, but the myriad challenges of identifying profitable opportunities, negotiating contracts and carrying out operations require diligent research and planning. This entails careful consideration of national and local political dynamics, the security environment, as well as more ordinary but equally complex issues, such as supply-chain management, sourcing energy and raw materials, price competition from cheap imports, and branding and distribution.