HC Highlights Arabian Cement’s Strategy to Navigate Cost Pressures and Market Shifts

In a recent report, HC Brokerage shed the light on the cement industry in Egypt, specifically on Arabian Cement Company (ARCC) where they focused on the local industry switching dynamics and the company’s efforts to revamps its strategy to enhance financial resilience.

Nesrine Mamdouh, Industrials Analyst at HC, commented on local industry switching dynamics in Egypt’s cement sector. In 2025, Portland cement prices surged by around 80–85% above the 2024 average of EGP 2,455 per ton. This increase was supported by approximately 14% year-on-year cement consumption growth in 10M25, reaching 44.2 million tons. Meanwhile, cement exports declined by nearly 6% year-on-year to 15.9 million tons.

As a result, sector utilization exceeded 90% of the licensed cement production capacity of 76 million tons. To contain cement prices, the Egyptian Competition Authority permanently lifted local output quotas in July 2025.

At the same time, the Ministry of Trade and Industry ordered the restart of nine idle cement production lines. Seven lines are expected within one year, adding an average of 12.6 million tons of capacity. Additionally, authorities halved license modification fees to EGP 130 per ton. Moreover, the government offered two new cement licenses of two million tons each.

Despite partial normalization, cement prices remain supported by strong domestic demand in Egypt. Local cement demand is estimated at 53.7 million tons in 2025. In parallel, disciplined supply management continues to support pricing dynamics.

Producers optimize the balance between higher domestic price premiums and rising cement export demand. This strategy ensures foreign currency self-sufficiency, fuel-import flexibility, and reduced regulatory risk exposure. HC expects cement pricing dynamics to remain sustained over the medium term.

The opportunity cost of allocating additional sales locally supports a continued local price premium. Furthermore, the cement sector demonstrates inelastic demand characteristics. A single producer cutting prices gains only short-term market share.

Competitors typically replicate price cuts, reducing overall sector profitability. Accordingly, from a game-theory perspective, producers benefit from aligning output with demand.

This alignment preserves market equilibrium and supports visibility for planned capital expenditure programs. However, beyond demand, cost dynamics and operational efficiencies will increasingly influence cement prices.

These efficiencies will materialize gradually through ongoing capex in fuel diversification. Operational optimization initiatives will also contribute to improved cost structures.

While demand remains broadly sustainable, growth continues to lag capacity reactivation. Therefore, strict cost discipline and efficiency-driven competitiveness remain essential.

Nesrine Mamdouh added insights on margin normalization and cement export performance. Based on macroeconomic and sector analysis, HC expects minor price normalization in 2026.

Cement prices may range between EGP 3,600 and EGP 3,620 per ton. This outlook assumes around 1.0% year-on-year demand growth. It also factors in higher diesel, gasoline, and electricity prices.

Foreign exchange volatility and coal and petcoke forward prices in mild contango are included. Local cement demand is expected to grow at a 2.2% CAGR during 2025–2030. Average annual demand is estimated at approximately 53 million tons.

Demand growth is supported by inflation moderation and monetary easing. Streamlined private building permits also support construction activity. Despite this, some delays persist at the governorate level.

The real estate secondary market has also experienced a noticeable slowdown. Additionally, project backlog execution supports cement demand growth. Government efforts to boost private investment and industrial expansion remain key drivers.

Foreign direct investment inflows further support long-term cement demand. Sector margins are expected to normalize gradually over the medium term. Historically, delayed cost pass-through has constrained timely cement price adjustments.

Therefore, a stable and transparent regulatory environment remains critical. Such an environment reduces uncertainty and limits the need for margin buffers. Regarding exports, clinker and cement shipments reached 19.5 million tons in 2024.

The export mix comprised approximately 38% cement and 62% clinker. In 10M25, exports declined by around 6% year-on-year to 15.9 million tons. The mix shifted toward 59% cement and 41% clinker. Stronger demand from neighboring countries drove this shift.

Reconstruction activity supported regional cement demand growth. Opportunities also expanded in the European Union and United States markets. However, a proposed 30% export cap per company may limit volumes. Larger exporters could face foregone export opportunities.

Unless absorbed by smaller exporters, volumes may remain constrained. Future capacity additions or reactivations could offset this impact. Looking ahead, logistics optimization remains critical for export competitiveness. Maintaining cost efficiency will support sustainable export margins.

Producers should focus on specialty and higher-margin cement products. Compliance with the Carbon Border Adjustment Mechanism remains essential. Nesrine Mamdouh concluded with insights on ARCC’s strategy and decarbonization roadmap.

According to company data and management interviews, ARCC is enhancing financial resilience. The company is executing a multi-phase strategy extending through 2030. This strategy focuses on alternative fuel reliance and quality improvements.

ARCC is expanding alternative fuel injection capacity across clinker production lines. The company is also investing in shredding facilities to reduce third-party cost dependence.

ARCC has begun commissioning its hydrogen injection project. The project targets a thermal substitution rate of approximately 55% by 2031. Hydrogen injection will improve combustion efficiency.

It will reduce energy consumption per ton of clinker. The project allows increased alternative fuel usage. It also achieves estimated petcoke savings of 8–9%.

Additionally, the project cuts CO₂ emissions by approximately 130,000 tons annually. The estimated payback period ranges between two and three years. Over time, hydrogen production costs are expected to decline. Long-term scalability may shift hydrogen from catalyst to fuel input.

ARCC has increased reliance on renewable energy sources. Its 24 MWh solar projects cover approximately 11% of current power needs. Planned initiatives include waste heat recovery systems.

A cement mill optimizer will further reduce electricity consumption. ARCC is also advancing supplementary cementitious materials usage. The company aims to reduce clinker ratios in cement production.

Alternative raw materials will minimize limestone consumption. Plans include low-carbon calcined clay clinker production. ARCC also plans to produce CEM III cement. This cement will include 50% ground granulated blast-furnace slag. A new cement silo project will support this transition.

Artificial intelligence technologies will optimize production processes. Combined initiatives will reduce CO₂ emissions to 2.3 million tons by 2031. This compares to 3.4 million tons in 2023. HC believes this decarbonization roadmap strengthens operational and financial performance. It also mitigates margin risks from rising costs and global competition.

ARCC exports high-quality clinker to the European Union. The company also exports cement to neighboring regional markets. Between 2025 and 2030, total sales volumes are estimated at 4.9 million tons annually.

Exports are expected to represent approximately 42% of total volumes. Revenue is projected to grow at a 3% CAGR. Average EBITDA margins are estimated at 32%. Net profit margins are expected to average 22%. By 2030, margins may normalize to 27% EBITDA and 19% net profit.

Final CBAM benchmarks are expected by early 2026. These benchmarks will clarify carbon cost exposure for EU importers. As ETS allowances phase out, lower-carbon cement demand will increase.

Carbon costs are expected to pass through to pricing structures. Efficient producers will gain market share and pricing power. Preliminary CBAM analysis suggests a netback premium of EUR 5.4 per ton.

This premium applies to ARCC’s EU cement exports. Margins could increase by approximately 1.8% during 2026–2030. This estimate remains subject to benchmark finalization and ETS price evolution.