How Egypt Can Optimally Utilize its Mineral Wealth
Egypt’s non-oil/gas mineral wealth is under-exploited, with high potential given smart utilization choices, reforms to attract foreign mining and processing investments, and efficient, sustainable resource planning.
Almost as important as the well-distributed natural wealth itself is where to process it and why, with which we start, and creating the right conditions for it, with which we end. To start, natural wealth must be processed where there is water, i.e. the populous Nile river Valley, and the Mediterranean and Red Sea coasts. Industrial zones, with ports for import and export, are needed, and the Nile is navigable. Heavy industries; water and energy-intensive, export-oriented and polluting, should be on the coasts, away from resort tourism, with renewable energy, desalinated, treated and reused seawater, while lighter, more domestic and consumer-oriented and cleaner industries should be on the Nile Valley to conserve scarce Nile water. Strict zoning and environment protection are a must everywhere, while processing should be near the raw materials and employ locals wherever possible, and with EU-compliant energy and water efficiency regulations. Fitting the bill are two zones on the northwest coast: 75km west of Marsa Matruh, and west of Dabaa town (180km west of Alexandria), two in the Sinai Peninsula: on the coastal northwest corner and at Abu Rudeis in the west, and four on the Red Sea in southerly order: Zaafarana, Ras Ghareb, Qusseir, and Al-Qustul in the southeast corner.
Main Minerals
Raw materials for seven industries hold the highest potential: 1) Gold, 2) Iron for the steel industry, 3) White glass sand for high-tech products, 4) Limestone for cement, 5) Phosphates for fertilizers, 6) Aluminium and titanium for electric vehicles, and 7) Kaolin and feldspar for ceramics. Starting with gold, deposits of 80.7 tons are now valued at USD 4.6 Billion. Most gold is in the southeast, and as a light and non-polluting industry, zones at Aswan and Qena Provinces can host jewellery and handicraft industries. Gold metal is also profitably exportable, especially to China and India. As regards iron, Egypt is a large net importer of high-purity (67%) ore from Brazil for the steel industry, but has usable ore reserves. At Baharia Oasis in the Western Desert lie 12 million tons of 52–54% purity ore, and 124 million tons of idle ore rich in manganese for making ferromanganese bars which are also used in steel making. Useful manganese reserves also lie in Sinai. East of Aswan lie 92 million tons of 42–44% purity iron ore, which are cheaper for steel makers than imported ore. Near Qusseir are 53 million tons of low-purity ore usable not for steel but in potential cement making there.
Finally is very low-purity colored ore south of Qusseir, usable in a potential colors and paints industry at Aswan. Egypt in 2021 closed its huge, severe loss-making state-owned flagship Helwan Steel Factory (at Cairo), but potential exists with unused iron ore and idle skilled labor available. Investors need to be attracted to build smaller and more efficient steel factories at the very sunny, windy, oil, gas and renewable energy-rich and centrally located Ras Ghareb. It is also best-placed to receive iron ore from Baharia and Aswan and manganese from nearby Sinai. Local demand for iron needs to be reduced in building (and bridges) by using domestic building materials such as limestone, sandstone, dolomite and clay-made bricks. Vehicles would best be electricity-run and made of aluminium alloyed with domestic titanium.
Many high-tech products can be made in Egypt: PC processing chips, internet fiber optic cables, precision optic equipment , photovoltaic (PV) solar power cells and panels, mobile phones, TV sets, car electronics, plus the medium-tech but also profitable glass products. The linchpin is that Egypt has the world’s largest (85 million tons) deposits of the finest white glass sand, which is the raw material for these products, along with abundant quantities of the important minerals tantalum and quartz. Glass sand is now exported at low prices and the other minerals little utilized, which is a serious but rectifiable strategic mistake. The world market for high-tech products is vast, valued in the trillions of US Dollars, and world manufacturing is dominated by eastern and southeastern Asian countries, whose decades-old dominance is now unshakable, especially as regards markets in Asia and the Americas. It is now strongly and increasingly bolstered by China as an investment source and a huge and fast-growing market, along with Japanese, Taiwanese and Korean firms which have for decades utilized the lower labor costs in southeastern Asian countries, and Singaporean and Malaysian firms, which are newer, homegrown, quite innovative and profitable producers and exporters.
Egypt largely lacks the high-tech industrial base, but has four other key strategic advantages that allow it to attract investment from the dominant eastern Asian manufacturers to produce in Egypt, and compete and export successfully. It is ideally located, on the world’s busiest shipping routes via the Suez Canal, on Europe’s doorstep, very close to fellow Arab and African markets, and with strong trade relations with all three regions, which would be Egypt’s target markets. The workforce is large, cost-competitive and readily trainable, with the Egyptian Pound’s weakness a further export advantage. PV solar power cells and panels hold special potential, for both domestic use and exports. Two special high-tech industry factors hold for Egypt. Main world producers are much more advanced than Egypt, which should not simply export the sand and fail to compete. Sand exports need to be banned and production to be only in Egypt. Secondly, world solar panel production is dominated by China. The USA recently passed a law fostering large-scale investments in that field, and seeks to bypass China’s dominance due to their strategic rivalry. American firms such as Tesla are innovative and advanced, and can produce in Egypt and export PV cells and/or finished solar panels to the USA.
Egypt has competitive advantages in cement making over many rivals: high limestone quality, low costs in raw materials, labor and energy, favorable climate, location, trade relations, and an excellent transport network with navigable sea and Nile waters. Limestone is abundant in Egypt; a world top 10 cement producer. This should continue and be supported, but with cement a classical heavy, water and energy-intensive and polluting industry, new cement factories would need to be on the coasts with environmental protection, and strategically located to minimize transiting the Suez Canal and paying its costly tolls. Moreover, so abundant is limestone in the Arab countries including Egypt that it can profitably export surpluses to other major cement producers such as Iran, Turkey, Russia, India, China, Thailand and Vietnam.
Similar dynamics exist in phosphate rock for fertilizers. Egypt’s huge, 2.9 Billion tons of phosphate rock reserves in its south far exceed its capacity to produce and secure market share in phosphatic fertilizers. Those are worthwhile and more soil and environment-friendly than nitrogenic fertilizers upon which Egypt relies for domestic use and exports. Phosphatic fertilizer production should expand, with Qusseir as the center, according to production and marketing capacity, while rock surpluses would be exported to rock-needing major producers such as Russia and China. Also much-needed is “anaerobic digestion” (catalyst-assisted, oxygen-free heat treatment) of the massive agricultural, animal and organic solid waste to produce top-quality compost (organic fertilizer) and greatly boost farm output and exports.
Aluminium and titanium hold high potential, but need a good strategy. There are 75 million tons of nepheline syenite ore (alumina ore alloyed with limestone and kaolin) in the southeast. Egypt has surpluses of the latter two, which makes uneconomic the magnetic separation and utilization of alumina to smelt aluminium metal at its large, state-owned aluminium factory at Qena Province, which still makes profit but needs reform and privatization. Nonetheless, nepheline syenite is a valuable and tradable commodity, and exportable to well-funded and energy-rich major producers of both aluminium and cement, such as China, Russia and the UAE. Nepheline syenite would be sold at a discount, as the UAE for instance has limestone and can import bauxite ore from northern Saudi Arabia (KSA) to smelt aluminium. Still, such are Egypt’s reserves that exports can help pay for imports of bauxite from KSA for a thriving aluminium and electric vehicles industry at nearby Ras Ghareb. Alloying aluminium with titanium (utilizing Egypt’s 650 million tons of titanium reserves) is ideal for light, strong, energy-efficient and non-corrosive electric vehicles, and a window of opportunity exists to outpace regional rivals and lead the nascent and lucrative Arab and African market. Titanium is also a key element in making mobile phones, along with white glass sand + cobalt importable from the Democratic Republic of Congo (central Africa). Ceramics round out the list of standouts, with Egypt already successful. Kaolin and feldspar reserves lie mostly in the far south and Sinai, and with the industry another energy-intensive and environmentally challenging one, special zones are needed at Al-Qustul and Abu Rudeis.
Other Minerals and Aspects
Egypt has many other materials useful in industry, such as coal and manganese to de-oxidize iron and improve its quality, black sands with metals valuable for steel making, sulphur for industry, copper for electric wirings, niobium as an anti-corrosive agent, chromium for steel making, magnesite for blast furnace linings, and talc to help make ceramics. Much upside potential exists as well for industries fed by other materials. Most prominent include processing other precious metals such as silver, platinum (best for quality medical equipment), Sinai’s emerald and turquoise, ornamental rocks such as marble, “quasi-marble”, alabaster and Aswan’s standout red granite, oil shales as one of the cement factory fuels, building materials such as hard limestone, sandstone, dolomite, basalt rock (for exportable “rock wool”, an excellent insulating material), sand and gravel and lastly, abundant table salt. Two advantages of processing the materials in Egypt wherever possible are the higher value added and profits, and creating good, well-paying jobs for Egypt’s 29 million-strong workforce. Lastly, the valuable nuclear power minerals are exportable: uranium to many countries and thorium to India, the world leader.
Egypt’s mineral investment law of 1956, changed in 2014, has long restricted foreign investments in mineral exploration and utilization. Reliance on bureaucratic, state-owned firms with outdated technologies and business practices caused sharp, persistent underperformance. Meanwhile, Egypt’s dry and rugged Eastern Desert is well explored and mined, but not the Western Desert, which is much larger and groundwater-rich but sandstone and deep sand-covered. Extensive exploration and efficient utilization are needed by world-leading Chinese, Australian, Canadian and other firms, as is a Ministry of Mineral Wealth separate from the Ministry of Petroleum for better focus. Technology grows ever more advanced, time and cost-efficient and non-intrusive, and top-class investments are needed. Investors would build the infrastructure, incur the exploration cost and risk and use their technology and world marketing prowess, in return for 30–35% of the revenue. Where the materials exist and reserves are known, the investor would earn 20–25%.
Full, integrated policy support is needed for investments; not by excessive privileges and tax breaks, but by reforms for ease of business, a better, more transparent business environment, fair labor laws that balance spurring job creation, labor market flexibility and mobility with protecting worker rights, plus better formal education for engineers, managers and production supervisors, and technical and vocational education and training, modeled on the best of world-leading German curricula, to boost labor productivity. Denmark’s “flexicurity” job market has proved successful, with ease of hiring, laying off staff and job switching, generous but conditional and time-limited jobless benefits that foster a quick return to the job market, a low jobless rate, healthy labor turnover, wage levels and growth, and good industrial relations with worker unions that provide for their members and responsibly negotiate wages. Lastly, attracting high-skill workers to new, fairly remote areas will require livable cities with good, well-paying jobs, full, efficient and decentralized services, streets with trees, a clean environment, healthy and active lifestyle, and high quality of life. Efficient mineral utilization and industrial success would be real, all-round winners for Egypt.
