Cement prices in the UAE are set to increase from February 1 following a decision by the UAE Cement Manufacturers Association. A senior industry official yesterday told Emirates Business that the association recently decided to fix the price of cement in different emirates. In Abu Dhabi, which is less affected by the slowdown in the construction sector, cement will be priced at Dh250 per tonne, whereas in Dubai it will be sold at Dh240 per tonne. In the Northern Emirates, where most factories are located, cement will be priced at Dh220 per tonne. “The new price structure will come into effect from February 1. The decision was taken to protect the cement industry and ensure that a balance is maintained,” said the official. Currently cement is priced between Dh220 and Dh225 in Dubai, while in the Northern Emirates it is being sold between Dh170 and Dh190. “Factories are undergoing severe loss and companies have been selling their products really cheap in order to survive in the business,” said the official. “The association decided to fix the above mentioned prices keeping in mind a fair deal for both the manufacturers as well as consumers,” said the official. According to another official, the demand for cement has been going down and has slid further this year compared to 2009. “The current situation is not very pleasant. The UAE’s demand for cement is expected to drop further by 20 per cent in 2010. Last year, we witnessed sales of about 17.8 million tonnes. We are expecting the demand to drop to about 13.5 million tonnes in 2010,” said the official. “This being the case, the situation of cement factories is expected to become even more critical. With no new projects either in Dubai or the Northern Emirates, we have to protect the cement industry,” said the official. According to him, the production cost is very high and the industry continues to face power shortages. “We have been working given these circumstances. We are expecting all factories who are part of the association to start implementing the new price structure from February 1,” he said and added that the decision cannot be imposed as it will have no legal binding. In April 2009, cement factories in the UAE were reluctant to reduce the price after the Ministry of Economy had fixed the cement rates across the UAE at Dh280 per tonne and Dh14 for a bag. The decision to revise the price was taken with the conditions prevailing at that time, when factories were selling cement at Dh300 to Dh310 per tonne, and bags at Dh15. According to a recent report by Global Investment House (GIH), UAE’s cement capacity will increase by 19 per cent in 2011. “UAE’s current cement capacity at 34 metric tonnes per annum (mtpa) [20mtpa of listed cement manufacturers and remaining of the unlisted cement companies] is expected to increase to 40.6mtpa [24.5mtpa of the listed and 16.1mtpa of the unlisted companies] by 2011. Such a growth in capacity would give rise to multiple problem provided economic revival comes up with the continuation of the big ticket projects,” it said. “Based on our universe, the sector profitability is expected to show a decline in 2009, mainly because of a drop in realisation prices, expected decline in utilisation rates and a majority of projects being put on hold. However, we believe that certain cement players would continue to perform well due to favourable cost structure and advantageous location.”

The UAE s cement capacity will increase by 19 per cent in 2011, according to a latest Global Investment House (GIH) report. "UAE s current cement capacity at 34mtpa (20mtpa of listed cement manufacturers and remaining of the unlisted cement companies) is expected to increase to 40.6mtpa (24.5mtpa of the listed and 16.1mtpa of the unlisted companies) by 2011. Such a growth in capacity would give rise to multiple problems provided economic revival comes up with the continuation of the big ticket projects," it said. "Based on our universe, the sector profitability is expected to show a decline in 2009, mainly because of a drop in realisation prices, expected decline in utilisation rates and a majority of projects being put on hold. However, we believe that certain cement players would continue to perform well due to favourable cost structure and advantageous location." Exaggerating the market Out of the nine listed cement companies in the UAE, two have recently completed their expansion. Arkan has raised its cement production capacity from 1.2mtpa in 2008 to 5.7mtpa by 2009 while Fujairah Cement Industries has raised its production capacity to 4.6mtpa in 2009 from 2.2mtpa earlier. Share of the listed cement companies, which currently stands at 60 per cent, is estimated to remain same this year, while major cement players such as Arkan Building Materials, Union Cement Company and Fujairah Cement Industries would account for 36 per cent of the market this year. In the unlisted segment, majority of the cement players will come with a full fledged production in 2010, which will further exaggerate the already glutted cement market. Unlisted companies, whose current share of the total market is estimated at 40 per cent, are likely to remain same by 2010. Major newcomers with capacity of more than 2mpta are Sharaf Group Cement Factory and National Cement Factory, said the report.

Aamal Company (Aamal), a GCC-diversified conglomerate, announced yesterday that its subsidiary Aamal Cement Industries has officially commenced operations at its newly opened cement block manufacturing plant in Messaid, Qatar. The development of the plant is in line with Aamal s strategy for diversification into new high growth revenue streams and will support the wider industrialisation of the Qatari economy, the statement said. The plant will manufacture a wide range of concrete building and paving products and will be one of the largest in Qatar by production volume with a maximum capacity of 85,000 blocks per day or 6,900 sqm of interlocking paving per day. The German manufactured machinery and equipment for the factory can produce different varieties of building and pavement blocks tailored to specific customer requirements. The factory can produce solid and hollow masonry blocks of different sizes and paving blocks and curb stones in a wide range of shapes, sizes and colours. At present, with demand outstripping supply, there is a significant opportunity for Aamal Cement to develop a high growth revenue stream in the concrete block industry in Qatar, the company said. Sheikh Faisal bin Qassim Al Thani, Chairman of Aamal said: "With numerous infrastructure and industrial projects to be undertaken in the coming years, the demand for manufacturers of quality concrete blocks for buildings and pavements is projected to be strong and Aamal Cement will be focused on growing the business to fill this supply shortfall in the Qatar market. Our goal is to be a major player in the market through the delivery of high quality products to the end users." Tarek Mahmoud El Sayed, Vice-Chairman, Aamal said: "With recently established companies such as Frijin Structural Steel Middle East, Senyar Industries Qatar Holding and Aamal Industrial Advanced Pipes, the industrial sector in Qatar continues to become more and more prominent and Aamal will continue to play a leading role in the development of this market."

Abu Dhabi: Union Cement Co, one of the UAE s largest producers, yesterday reported annual profit fell by 64 per cent in 2009 compared to the previous year, indicating the continued effect of the downturn in the construction sector. UCC s annual profit reached Dh57 million on the back of Dh700 million in revenue compared to the Dh1.1 billion revenue figure recorded in 2008. At the time of going to press, the company had not released its full earnings. Through the first nine months, UCC had reported a 5 per cent increase in profits over 2008 to Dh97 million, meaning its annual result could reflect a fourth quarter operating or investment loss. Analysts attributed the increase in profitability through the first three quarters to the company s move to multi-fuel kilns which use a combination of coal and natural gas, lessening its dependence on expensive fuel and diesel. Based in Ras Al Khaimah, UCC s annual production capacity is estimated at 4.2 million tonnes of cement and 4 million tonnes of clinker. The company is 40 per cent owned by the RAK government and 20 per cent owned by the Abu Dhabi Investment Authority, according to the Abu Dhabi Securities Exchange website.

Khuzestan Cement Co., located in southwestern Iran, is due for inauguration on 20 January. The project cost some 1100 billion rials (US 110 million) plus 39.6 million Euros. The company s production capacity stands at over 2.5 million tpa, making it one of the top three producers in the country.

Construction sector in the UAE witnessed a massive drop in costs during the past 12 months. Prices of most materials dropped by more than half compared to 2008. Producers and distributors said they experienced a difficult year as reduced cost coupled with falling demand led to severe drop in revenues. Most affected were ready-mix companies. Many of them had to cut their production by more than 50 per cent and send several staff on leave in order to reduce operational cost. The UAE market experienced oversupply of cement and producers had to cut production, in an effort to bring down the excess cement in the market. By the last quarter of 2009 imports had drastically reduced. Steel used in the construction sector also faced a similar fate. The beginning of the year witnessed a severe oversupply in the market, bringing the prices down by half. Although the excess cement in the market had significantly reduced by the end of the second quarter, imports failed to pick up as demand continued to remain weak. Meanwhile, local producers said they had not reduced production as locally manufactured steel was sufficient to satisfy the domestic demand. Producers, however, said they had to severely reduce their profit margins in order to discourage further imports. Cement GCC cement sector earnings, after years of high digit growth, ended in 2008 on a grim note. Apart from a drop in demand, cost continued to put pressure on the companies, pushing down its margins as well as profits. Overall the sector ended 2008 with an earnings decline of 35 per cent to $1.4 billion (Dh5.14bn) as compared to $2.2bn in 2007, according to a report by Global Investment House, In June 2008, the Saudi government prohibited the export of cement to help reduce prices. Later in the third quarter of 2009 selective exports were permitted. The beginning of the year itself witnessed a drop in cement prices in the UAE. Compared to the last week of December 2008, prices fell by about 10 per cent by mid-January mainly due to declining demand. In January cement prices in the UAE ranged between Dh340 and Dh400 depending on the urgency and payment method. Factories contacted by Emirates Business said that the prices have been fixed at Dh360 per tonne. Traders, however, were selling imported cement between Dh340 to Dh400 depending on the method of payment. Following severe shortage and fluctuation experienced during the first and second quarter of 2008 the UAE Government had fixed the cement price at Dh360 per tonne and Dh16 per bag. The UAE cement market showed good improvement in 2008. The total cement consumption of 17.24 million tonnes in 2007 went up to 21 million tonnes in 2008. Also daily sales of the cement producers group went up to 77,882 metric tonnes, which was the highest ever. It was around an average of 52,000 metric tonnes a day in 2007. The government in February also decided to reintroduce five per cent customs duty on the import of cement and steel. The decision was made effective from February 15, mainly to discourage cheap imports into the UAE market. By the beginning of the second quarter local cement companies were asked to reduce the price of cement by 22 per cent. With effect from April 1, cement companies were informed that the new price has been fixed at Dh280 for a tonne of bulk cement and Dh14 for a bag. The Ministry of Economy took the decision in co-ordination with the Cement Producers Group. The decision to revise the price was taken with the conditions prevailing at that time. Speaking to this newspaper Mohammed Ahmed bin Abdul Aziz Al Shihhi, Director-General of the Ministry had then said: "We had a previous cap on cement prices. But the prices of oil and raw materials have gone down, which prompted us to revise the prices," said Al Shihhi. "All cement factories have been informed about the new price levels and we will once again send a reminder," he added. Although the factories did not immediately comply with the new price cap, prices dropped by about six per cent in mid April. Bulk cement was being sold at about Dh300 to Dh310 per tonne, while prices of cement per bag dropped from Dh16 to Dh15. Meanwhile, cement imports continued into the UAE. Deliveries from Pakistan landed in the UAE at about $65 per tonne. Adding $2 as the transport cost to customers meant a price of $67, which was still very competitive with prevailing prices in the market. The third quarter witnessed further reduction in prices as it dropped to around Dh260-Dh280. The quantity of imports had meanwhile reduced. By fourth quarter the prices fell further. Prices of cement had dropped to around Dh220-Dh225 in Dubai whereas in the Northern Emirates it was priced between Dh170-Dh190. The price of a cement bag in Dubai had dropped to Dh13-Dh13.5, while in the Northern Emirates it was lower by about Dh12. Officials said that extreme competition compounded by fewer projects were the main reason for the drop in cement prices. Cement imports into the UAE have dropped significantly. Earlier this month this newspaper reported that imports reduced due to the drop in prices of locally produced material and excess stock. Producers and traders in the UAE said they were preparing for more tough times ahead, as they continue to remain clueless about the future course of the construction sector. Meanwhile according to sources, prices of clinker have also dropped during the past few months. It has gone down by about 10 to 15 per cent compared to the last quarter. Ready-mix Prices of ready-mix too bottomed out in Dubai and other emirates. The mix was being sold at as low as Dh200 per cubic metre. The readymix industry in Dubai and the Northen Emirates has been the hardest hit in the global crisis with sales dropping severely and companies reducing profit margins to a bare minimum in an effort to attract customers. Officials earlier said that the industry is going through a rough patch with production levels at its lowest as many projects have been either suspended or put on hold. They added that in some of the firms, almost 90 per cent of trucks continued to remain idle. Prices of readymix concrete vary according to specifications prescribed by different projects and industry officials said that cost has dropped by more than Dh150 per cubic metre in the second half compared to the first half of 2009. Another official said that concrete prices have already bottomed out and it cannot be sold any cheaper unless the supplier is willing to sell it at a loss. "There is no profit margin left in the industry. The current price is just sufficient to manage the operational cost of the plant and pay the workers salaries," said a readymix firm executive. Steel Prices were usually moving around $460 to $480 during the first two quarters following a massive collapse in October and November of 2008. With an ongoing construction boom across the country, the year 2008 began with rebar prices at $760 per tonne in January, gradually moving up to $770 in February, $840 in March, $1,025 in April 2008 and reaching the peak of $1,540 in July 2008, after which it started its downward slide. It, however, remained more than $1,000 until September 2008. Prices during the first half of 2009 had been fluctuating. The year started with rebar prices at$485 in January, from $460 in December, increasing to $510 in February before falling to the lowest price (for the past two years) of $420 in March. Rebar prices again moved up in April to $455 and increasing further to $495 in May and falling again to $455 in June. By the third quarter rebar prices had shot past $500 per tonne for the first time since February this year and has reached the highest since November 2008. Industry analysts, however felt the increase could be temporary as there has not been enough evidence of real growing demand. "Prices had been relatively steady during the past two months. It looks like they are moving into a very unstable phase again," Karel Costenoble, Manager at Mesteel had told this newspaper in August. Billets prices also increased from $460 during the first week of July to $480 per tonne in August. It touched its lowest price of $333 in March – the lowest during the past two years. Currently, the demand for steel in the country remains soft as work on several projects continues to remain low key. The prices however has been marginally increasing. While rebar was priced at $475 per tonne in November, by the second week of December it increased to $495 per tonne. "Very soon, we might witness a further increase following an increase in the price of scrap," said Costenoble. Local producers had also increased the steel prices. Ajay Aggarwal, CEO of RAK Steel, had earlier told this newspaper that a price increase locally was inevitable. "The demand remains the same. However, local manufacturers have to make some profit and it is bound to reflect in the pricing strategy," he said. Meanwhile, the prices of universal beams and columns have also moved up from $580 per tonne to $600 per tonne. Japanese beams are priced at $540 per tonne CFR Dubai, said Costenoble. The drop in prices of building materials had a similar impact on overall cost of construction. In Dubai the construction cost per square foot dropped from a high of Dh1,200 per square foot (core and shell residential) in August 2008 to between Dh280 to Dh300 per sq ft in general. Contractors profits also came down from 15 to 20 per cent to between eight and 12 per cent. By the second half the newspaper reported that the commercial core and shell construction costs have come down by an average of 60 per cent from October 2008 to a low of between Dh220 and Dh260 per square foot.

Cement and ready-mix companies in the UAE are gearing up for a massive opportunity for supplying cement and concrete for nuclear power plants in the UAE. The UAE is expected to award contracts estimated to be worth $40 billion (Dh147bn) to build several nuclear reactors. According to a senior industry official, the contract for nuclear power plants would be a blessing for cement companies already struggling with falling demand and reduced profits. "We are talking of a massive potential here ahead of us. Constructing a nuclear power plant requires a lot of special grade ready-mix and companies are already gearing up towards it," said a senior official of a UAE-based ready-mix company, who did not want to be identified. "We on our part have already made initial enquiries about the technological improvement that needs to be carried out to cater to the forthcoming demand. We are closely monitoring the progress of negotiations and tenders. The next step can be taken after the contract is awarded," said the official. The negotiations have reached the final stage and contracts are expected to be awarded soon. The UAE recently set up the Emirates Nuclear Energy Corporation (Enec) to spearhead the country s nuclear energy programme. A recent announcement said that Enec is in the advanced stages of assessing several potential sites across the country. Enec Chief Executive Mohamed Al Hammadi expressed confidence that the nuclear power plants could begin producing electricity in 2017. Negotiations are currently under way with teams of contractors bidding to design, build and help operate the proposed plants. Actual construction is expected to start in 2012. "We are at the end of the cycle. The contractors will first approach the ready-mix companies who thereafter will contact us," said Mustafa Gorgunel, General Manager at Union Cement Norcem. According to him the cement industry is badly in need of such an opportunity. "The production levels and demand for cement has reduced during the past two quarters. The situation will continue to remain the same until 2011. I was even told that we should expect signs of growth only from 2012." "At UCC, we are equipped to produce all types of cement that is used in the construction sector. Moreover, the industry is quite flexible. We will be able to easily change the production type," he added. Cement makes up 15 per cent of high-density concrete, used in construction of nuclear power plants. Michael Richardson General manager at RAK Cement also said that the new opportunity would be a tremendous boost for the industry. "We have not started planning about the demand or supply to power plants. Once the contractor is selected the other aspects would become clear," he said. Multinational firms lobby for UAE nuclear deal Lobbying has already begun by major contractors for the nuclear power plant project. According to a Reuters report South Korean President Lee Myung-bak is visiting the UAE in a push to win one of the world s biggest nuclear power plant contracts. The contracts estimated to be worth $40 billion (Dh147bn) to build several nuclear reactors is expected to be awarded "possibly early next week", industry sources told the news agency. A South Korean consortium of Korea Electric Power Corporation, Hyundai Engineering and Construction, Samsung C&T, and Doosan Heavy Industries is in the running to win the largest-ever energy deal of the Middle East. Other bidders include a consortium of General Electric and Westinghouse Electric, a subsidiary of Toshiba Corporation, and a French consortium led by EDF and GDF Suez and including Areva and oil group Total. The French consortium was initially seen as a front-runner for the deal but it recently appeared to be losing ground to the South Korean firms. On the Korea Exchange earlier this week, shares of Korea Power Engineering and Doosan Heavy Industries rallied on expectations for the deal, analysts said. IBK Securities analyst Yoon Jin-il said the contract is expected to be split in three stages with the initial order to be worth about $5bn, but the first-phase winner is likely to take home the remaining two.

Chennai, Dec 17 : The Rs. 1,137-crore Chettinad Cement Corp plans to increase its annual production capacity to 13 million tonnes in two phases by 2013, the company said here Thursday. In the first phase, the company will increase capacity at existing plants in Tamil Nadu and the second phase will involve setting up a three million tonne unit at Gulbarga in Karnataka.

Ex-factory cement prices in Dubai have dropped between eight and 13.5 per cent (about Dh20 to Dh40) since last month and by 33 per cent since March or April, said a senior industry official who did not wish to be named. In October, industry sources had said cement was sold in the UAE at about Dh240 to Dh260 per tonne. "Ex-factory cement prices stood at Dh340 eight to nine months ago. These are now down to Dh220 to Dh225 in Dubai whereas in the Northern Emirates these stand at Dh170 to Dh190," said the official. "In Dubai, you can get a bag (50kg) for Dh13 to Dh13.5, while in the Northern Emirates it could be lower by about Dh2. Between last month and this month, there was a drop of Dh5 in prices. The readymix companies will add Dh10 to Dh15 for transportation and sell it at their current prices depending on the formula." Extreme competition compounded by fewer projects are reasons for the decline, said another source. However, according to recent prices released by Statistics Centre Abu Dhabi, cement slipped by 0.32 per cent compared to its September price, reflecting the drop in the average prices of Ittihad sulphate resistant cement from Dh330 to Dh321.25 per tonne and Ittihad Portland cement from Dh320 to Dh311.25 during the comparison period. In addition, the average price of concrete decreased by 10.99 per cent compared to September, with the price of standard UAE readymix concrete retreating from Dh352.5 in September to Dh315 in October and that of UAE sulphate resistant readymix concrete from Dh363.75 to Dh322.5 over the same period.