Contractors braced for summer cement crisis

It looks as if Gulf contractors will be facing yet another summer of cement shortages, coupled with the inevitable sky-high prices.

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By  Sean Cronin Published  June 11, 2005

Gulf contractors will be hit by crippling cement shortages this summer as producers struggle to keep a lid on prices in the face of soaring demand. It comes as billions of dollars are being invested into the construction of new cement plants throughout the GCC. But that investment will not help to alleviate expected shortages in the coming months. In Oman, the price of cement has already jumped by 25% since the beginning of the year, according to producer Raysut Cement. Saudi Arabia has also been hit by massive increases in the cost of cement, particularly in the western parts of the country where the price of a bag of cement has rocketed from around SR10 to SR25 in recent weeks. The government of Qatar has also moved to relax cement import restrictions in a bid to alleviate chronic shortages that are beginning to emerge. And in the UAE, suppliers also fear a re-run of last year’s volatile supply situation. “The problem is that as a material, cement is very difficult to stockpile — we have 12 days’ inventory, that’s all. And at the moment it’s flying out as fast as it’s coming in,” said the general manager of one UAE producer. Now imports from India and other neighbouring cement-producing countries are flooding into the region. Indian cement giant Ambuja is one company that has capitalised on the shortages, with GCC orders rocketing in recent months. Assistant vice president, Jayesh Doshi, said: “Previously, we’ve been exporting 600 000 to 800 000 tonnes of cement per year to the UAE. However, over the past 10 months or so, the demand has risen and we’re now exporting 100 000 tonnes of cement per month to the Middle East — and we’re expecting that to go up even further.” Several countries throughout the region plan to increase cement production and have already started to expand facilities, but most of this new capacity will not be ready until 2006. The Qatar National Cement Company will boost its cement output by 4000 tonnes daily with the commissioning of its third production line in 2006. There are also five other applications for new cement plants pending with the Ministry of Energy. The Raysut Cement company in Oman is also planning to increase production and is launching a rights issue to fund its growth plans. The company is close to commissioning a new plant, which will add around 1 m tonnes of capacity. But that capacity will not come online until the end of the year and so will not help to alleviate current supply problems in the market. “Both cement companies in the country are importing cement. How do we cover our costs? We are trying our best not to increase prices but it is impossible to sell at existing prices and still cover the import costs. I think the government is now beginning to understand the scenario,” said Mohamed Aldheeb, Raysut Cement general manager. He added: “In Oman our prices are still below the rest of the GCC at 25 Omani riyals per tonne. But in Saudi Arabia, the price is going up to unbelievable levels.”

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