Cement price wars erupt after Oman bans exports

UAE was importing 860 tonnes of Omani cement a day; some 20% of the sultanate's output

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By  Eudore Chand Published  June 5, 2004

Oman has effectively banned the export of cement. This represents a major knock for the UAE, which was importing Oman’s excess cement production, some 860 tonnes a day. This represents about 20% of Oman’s total cement output of 4300 tonnes a day. Even though the ban is said to be temporary by some industry sources, it means short-term price rises for cement users in the UAE. “This situation has arisen due to UAE suppliers paying higher than market rates in Muscat, and therefore driving up the price in the Omani market,” Julian James, director of aggregate operations, Middle East, Tarmac Quarry Products, told Construction Week. Demand from the UAE has sucked in cement from the sultanate with Omani suppliers more than willing to sell to UAE cement suppliers, and actually causing reduced supplies in the local, Omani, market. “This is a typical supply/demand situation and has become an issue, as several large public sector projects are in the works in Muscat and they do not want to suffer delays due to cement shortages,” says James. He says that government in Muscat is also acting to protect local contractors. Some importers in Dubai said Omani cement producers are being asked to get clearance to export. “This is very difficult to obtain, but a load, now and then, does manage to trickle into the UAE marketplace,” a source told Construction Week. Cement prices in the UAE have been shooting up and contractors fear that the Omani move may prompt local producers to raise them even further. UAE users claim that notices of cement price increases are a regular feature. “The price increase in cement is almost every week,” said a contractor. Recently, the UAE Contractors Association held a series of meetings in Abu Dhabi, Dubai and Sharjah to discuss the problem. The meetings called on the government to intervene against artificial price hikes. They have asked the authorities to introduce price controls, a request that is unlikely to be accepted in this free market economy. From just Dhs6-7 per 50 kg bag some six months ago, cement prices in the UAE were being quoted at Dhs13.50 and up to as much as Dhs20-23 per bag. From about Dhs250 a tonne at the beginning of May, by month-end the price had reached Dhs350 a tonne. Most of the major projects, such as the Dubai International Airport expansion, Jumeirah Beach Residence, and some Nakheel projects such as Palm Jumeirah, have completed site excavations and are ready to build up from there, requiring vast amounts of both cement and steel. If the Omani restriction on exports of cement continues, it is possible that there may be a slow down in private sector building. “The public sector will secure supplies to prevent delays in government work/prestigious projects until the private sector finds an alternative source,” says James. Cement could be sourced from South Africa, and the situation may also encourage other internationals to enter the market. “Once alternative suppliers do enter the market, this will have a positive effect when the market does dip and there will be more competition in cement supply provided that importers can match the cost base of local cement ex-works as opposed to import,” he adds. The construction industry in the UAE was hoping that after the recent dampening in the prices of steel, those of cement and related products would follow suit and provide the sector with the much-needed relief.

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