Chinese cement makers are looking to growth potential in Africa to make up for a shrinking domestic market amid a protracted property crisis and slow economic recovery at home.
Thanks to its investment in Ethiopia, the Democratic Republic of the Congo (DRC) and Mozambique, major cement producer West China Cement Limited said its African operation was the major contributor of profits to the overall business last year.
"High quality development in Africa will be a major focus in 2024 and beyond," chairman Zhang Jimin said in March.
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Both the average selling prices and profit margins were higher in its African plants than its domestic business, according to the company's annual earnings report.
Prices at its Chinese operation stood at 292 yuan (US$41) per tonne in 2023, far below the 813 yuan (US$813) produced by its African plants.
As a result, the gross profit at its Mozambique operation is 358 yuan per tonne, and even more in the DRC (509 yuan) and Ethiopia (504 yuan) - much higher than the 44 yuan of its China operation.
"It justifies the company's expansion into the region," said Hu Huiling, senior analyst at REDD Intelligence.
As demand in China continues to decline amid real estate woes, Chinese companies are exploring market potential in Africa - where China has funded mega projects such as power dams, railways, airports and highways.
Gyude Moore, policy fellow at the Washington-based Centre for Global Development and a former public works minister in Liberia, said Chinese companies were now hedging against that decline by expanding in other markets.
"That competition will only become more challenging [in China] as the infrastructure and real estate sectors decline," Moore said.
Moore said that while the built environment in Africa remained significantly underdeveloped, there was potential for investors over the long run.
Lauren Johnston, a China-Africa specialist and an associate professor at the University of Sydney's China Studies Centre, said that with a growing middle-income group in Africa, the continent was bracing for a boom in cement consumption to upgrade homes as well as public and business infrastructure.
"The African market offers much faster growth," Johnston said.
She said China could benefit from its scale, experience and competitiveness in many African countries, while African countries can benefit from joint ventures with Chinese companies.
In Amhara Regional State, 130km (80 miles) north of Addis Ababa, the capital of Ethiopia, West China Cement is building a US$600 million phase-1 joint venture with Ethiopia's East African Holding Company that will be the country's largest cement factory, with an annual production capacity of 4.5 million tonnes.
"When the cement projects are completed within 2024, East African Holding will alone be able to cover more than 50 per cent of the current cement demand of Ethiopia," the company said on its website.
West China Cement has a cement plant in the DRC, which is strategically located close to Lake Tanganyika, enabling exports to nearby countries such as Rwanda, Burundi and Tanzania.
The Chinese state-owned Sinoma International Engineering Company is the contractor for West China Cement's 4.5 tonne per year Lemi National Cement plant in Amhara but has interests in other African countries. It was also chosen by the same joint venture to build another cement plant at the Melka Jebdu Industrial Park, 510km east of Addis Ababa.
The cement facilities are part of a US$2.2 billion joint venture between West International Holding Limited, a subsidiary of West China Cement, and East African Holding.
On Friday, a ceremony to mark the official start of cement production at Lemi National Cement was held.
Another Chinese cement company is Shanghai-listed Huaxin Cement, which has interests in Tanzania, Zambia, South Africa and Mozambique.
In Rwanda, President Paul Kagame last year inaugurated a cement plant owned by Anjia Prefabricated Construction Rwanda, a subsidiary of West International Holding, the Africa arm of West China Cement.
China's past development and African demographics indicate that construction and infrastructure spending in coming decades will drive up demand for cement in Africa, according to Charlie Robertson, head of macro strategy at asset management firm FIM Partners.
He also said the high cost of capital in Africa - because of the continent's savings shortage - meant that those with money who invested tended to get a high return on equity.
"The low cost of capital in China means it is easy to fund new cement plants, which makes competition intense and keeps profit margins low," while the high cost of capital in Africa meant less competition but higher profit margins, he said.
