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extraction projects worth their salt
by frederik richter
one of the many gifts of the ancients to modern
egypt is lake qaroun, which covers 250 square kilometers in the
desert north of fayoum city. the lake was formed 70,000 years ago
when the nile’s waters burst through the low mountains surrounding
the fayoum depression, but it was the ingenious water engineering
projects of the middle dynasty pharaohs – including a canal
that funneled in excess water during the nile’s annual flood
– that turned the shallow swamp into a giant reservoir teeming
with fish and rimmed by fertile agricultural land.
but as every egyptian farmer will attest, when water is pumped into
the desert and given no way out, it evaporates leaving behind a
residue of salt. fayoum’s blessing was also its curse. the
450 million cubic meters of irrigation runoff that flows into lake
qaroun each year contain up to 800,000 tons of dissolved salts,
which concentrate further as the lake’s water evaporates under
the baking sun. centuries of salination have made the lake unsuitable
for freshwater fish and destroyed thousands of acres of adjacent
agricultural land. yet in this curse, investors have found a blessing.
“the lake’s high salinity is a bonanza for the salt
industry, as it’s an enormous reservoir of salts,” says
hesham emara of emak for salts & minerals company.
emak, a subsidiary of kuwait’s m.a. kharafy group, hopes to
exploit this natural resource in a way that generates revenues while
improving the ecology of the lake. the company is fronting $745
million to build a 6,000-acre industrial park on the northeastern
shore of lake qaroun that will include salt fields as well as processing
and packaging plants. the project aims to extract 600,000 tons of
salt per year during its first phase, later to be expanded to nearly
one million tons. but even at that rate, there is little worry about
running out of stock. lake qaroun contains an estimated 30 million
tons of dissolved salts.
people inevitably associate salt production with iodized table salt,
but jehia nassar, the project’s technical consultant, explains
that salt comes in many varieties with different commercial values.
he says lake qaroun contains high concentrations of sodium sulfate
and sodium chloride, as well as magnesium chloride and sodium carbonate
(soda ash).
salt production begins by flooding large, shallow basins with water
and allowing it to evaporate. in the case of lake qaroun, evaporation
increases salt concentration ten-fold to over 300 grams per liter.
“during this process we depend solely on the natural crystallization
of the salts,” says nassar. “there are no chemicals
added.”
once collected, the salt is sent to a processing plant for sorting
and further refining. salts can be used as raw material or processed
to function in a wide range of end-products, forming the constituents
of everything from detergents to fire retardants. industrial salts
are used in the petrochemical and chemical industries, as well as
in the manufacture of building materials, paper, glass, ceramics
and medical products.
according to emara, construction of emak’s industrial complex
is expected to begin by the end of the year and will last 18 to
24 months. once fully operational, he says, the new site is expected
to cover both domestic and export demand. “we are targeting
annual exports of $250 million, not just within the region, but
anywhere in the world wherever needed,” he says.
while emak is busy putting the paperwork together to get started,
another company has been extracting and refining salts on the southern
shore of lake qaroun since 1992. state-owned egyptian company for
salts & minerals (emisal) was conceived as a solution to the
environmental damage associated with the rapid expansion of agriculture
in fayoum governorate. the company’s salt fields help reduce
the salinity of the lake while creating jobs and generating revenue
for the impoverished governorate. spread over 4 square kilometers,
it currently extracts some 350,000 tons of salts, including 100,000
tons of sodium sulfate and 150,000 tons of sodium chloride.
while emisal remains the fourth largest producer of edible salts
in egypt, its business is mainly focused on industrial salts. the
state-owned company is the sole supplier of the local detergent
industry. until a few years ago, emisal was able to export a large
share of its production, but local demand has since gone up, growing
by nearly 5 percent per year according to ahmad atif dardir, emisal’s
managing director. “previously, we covered 100 percent of
the local market, but now we must import [small quantities],”
he says.
packing is a severe constraint on the company, as most of its packaging
materials – made of synthetic materials that reduce humidity
– must be imported. “the packaging is made of either
polyethylene or polyester, and this is very expensive whether you
produce it locally or import the material,” dardir explains.
in fact, he says packaging accounts for nearly half of all production
costs. “we tried various ways of packing, but they were not
accepted by the market,” he says. “there are cheap packing
materials in the local market, but we want to keep our name and
quality.”
an important client of salt producers is the fertilizer industry,
which has seen strong growth in recent years including over $1 billion
in investments by indian and canadian investors to build plants
for phosphorous and urea-based fertilizers. locally available salts
such as calcium nitrate are used in the production of azotic (nitrogen-based)
fertilizers, which are used to improve soil condition.
yet the two most important ingredients in fertilizers, magnesium
sulfate and potassium sulfate, which are important to the chlorophyll
in plants and growth of fruit respectively, are not yet produced
in egypt. approximately 100,000 tons of potassium sulfate is imported
each year, primarily from germany, jordan and israel, while 10,000
tons of magnesium sulfate is imported from the dead sea region and
china.
fertilizer companies will soon have domestic options. emisal says
it plans to produce 27,000 tons of magnesium sulfate starting in
the second half of 2007, while emak announced it would produce both
salts in the later stages of its production.
another major product of the salt industry is calcium sulfate (gypsum),
which is rarely recognized by household end-users but is nonetheless
a le 250 million strong industry. “in every building in egypt,
there is a gypsum product,” states paolo gugole, managing
director of bpb placogips, a joint venture between one of the world’s
leading construction materials company, france’s saint-gobain,
egypt’s fastest-growing construction firm, orascom construction
industries (oci), and local mortar producer united paints &
chemicals (upc). he explains that gypsum is a key component in cement,
the basic material in modern construction. portland cement, for
instance, contains up to 5 percent gypsum, which controls its set
time.
the connection with cement makes gypsum a strategic commodity inextricably
linked to the growth cycle of the construction sector. cement production
reached 36 million tons in 2005, of which 30 million tons were used
in domestic projects. with egypt requiring some 250,000 housing
units a year simply to keep up with demand, cement production has
nowhere to go but up. in addition, gugole says, the expected growth
in certain non-residential segments such as hotels, hospitals and
universities will increase demand on gypsum, both as a constituent
of cement and as building plasters.
bpb placogips was formed in december 2000 when the french-egyptian
consortium acquired a 90-percent stake in state-owned egyptian gypsum
company for le 92 million. the remaining 10 percent went to the
company’s employees. operating three plants and three quarries,
the company is egypt’s largest supplier of gypsum-based building
materials.
it is also the sole supplier of plasterboard sheets to the local
market. yet despite exporting large quantities of raw gypsum, bpb
placogips must currently import the gypsum-based product from italy.
gugole explains that egypt’s market for plasterboard, estimated
at 1.8 million square meters per year, is simply too small for a
local production line. “a factory would require a minimum
production of 12 million square meters per year to be [economically
feasible],” he explains.
low volumes attest to an anomaly in the construction industry. unlike
europe and north america, where plasterboard is widely used in residential
dwellings, in egypt it is used almost exclusively as wall and ceiling
panels in commercial buildings, while cement is used for partition
walls in homes. gugole argues that changing this preference would
not only reduce construction time, as plasterboard is faster and
easier to install, it would create the economies of scale necessary
to sustain a local production line.
the company could also benefit from a widening export market. bpb
placogips already ships about 10 percent of its production to 17
countries in the middle east, africa and eastern europe. “the
high level of quality, good operations performance and efficient
logistics makes egypt competitive in export markets,” affirms
gugole, who sees solid fundamentals for sustained growth, predicting
bpb placogips’ exports will grow by 40 percent annually and
enter new markets.
while bpb placogips is optimistic it can cultivate export markets,
others are playing it cautious. gypsum companies have been slow
to realize their export potential and have, to date, limited their
operations to quarrying and basic processing for the domestic market.
raw gypsum exports account for just 10 percent of all sales.
while most quarriers seem content with the status quo, ali salem
moustafa, general manager of sina gips company, is actively seeking
representatives in europe. it’s a tough sell, he admits. while
gypsum production is up to 40 percent cheaper in egypt, transportation
costs are three times production costs.
sina gips, a subsidiary of the osman group, has a production site
near ras sidr in southern sinai with a capacity of 210,000 tons
per year, which is mostly absorbed by the local market. to move
into exports, sina gips expects to start a third production line
by the end of the year.
the company will undoubtedly face stiff competition from other producers
in turkey and iran which, according to moustafa, offer lower quality
gypsum, but at more attractive prices. still, he is confident that
as production expands and exports increase, egypt will find its
niche in the global market.
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