Cement price deal not iron-clad

Cement bags at a Dubai project site. Sluggish construction activity and stockpiles are bringing down cement prices. (EB FILE)

The Cement Manufacturers' Association (CMA) has described as a 'success' the initiative adopted by domestic cement plants a month back, to raise the price of local cement and fix it at Dh220 per tonne.

However, agents and contractors say they can still buy cement for less than Dh220 a tonne. Some plants are reportedly breaching the deal in order to sell off huge stocks that have accumulated at their factories because of a fall in demand. Demand is expected to slide further in the coming months as the summer brings a slowdown in construction activity.

"I can confirm that prices are now stable at Dh220 a tonne and my company, Gulf Cement, was the first to enforce the decision," Ahmad Al Amash, Chairman, CMA, told Emirates Business.

Asked about violations by some plants, Amash said he had seen no evidence of such breaches. "We have fixed the price at Dh220 a tonne as this is the lowest viable price. Any lower, and the plant could incur big losses."

Amash said the coming months might see a rise or fall in the price of cement. "Prices might remain at the current level. Nobody in the country can forecast the market situation in the coming months," he added. Agents and contractors however, said the price increase was unlikely to stick.

"A drop in demand in the summer will prompt some plants to breach the deal they signed in early February," said one industry source. "Several plants are selling cement at less than Dh220 per tonne, especially when large amounts are sold at a time."

Essa Al Attiyah, Chairman of Abu Dhabi-based Qamraa Contracting Company, said the price of bagged cement had not risen in the past two months. "We buy the bag for Dh13.40 and a tonne costs Dh260 to Dh270, which covers the cost of transportation from plants in the Northern Emirates. The price of a bag of cement from a plant in Al Ain is Dh14. I believe the price of cement will fall this summer because demand will decline.

"Any deal between plants to increase prices will not last long because low demand will cause the deal to collapse and big contractors and traders who require large amounts will be asking for special prices."

Taha Yassin, an agent at Al Saqr Cement Company of Dubai, said prices were stable last month. "The price increase demanded by domestic plants was very small and was not felt by the market in most emirates. A 50kg bag sold for Dh13 in Dubai and for Dh12 in Sharjah and Ras Al Khaimah."

He said plants had been partially successful at fixing the price at Dh220 for loose cement, but added: "I think this success will not last long. If one plant sells at a lower price, the deal will collapse, which is highly likely especially with the onset of summer. Some plants will be forced to sell large amounts to certain customers at lower prices or they will suffer big losses."

Yassin said the decision to fix the price at Dh220 a tonne was a clever move since the price was in line with the current cost of imported cement. Consequently, customers would prefer to use local cement since they can obtain small discounts from local plants, which they could not with foreign manufacturers.

Emad Ahmed, an agent at the Ahmed bin Rashid building materials supplier in Dubai, said several domestic plants were still selling cement at pre-fixed prices, especially with large orders.

"Contractors prefer local cement because its manufacture is supervised by municipalities. Most projects being built in the UAE encourage the use of local cement. Currently, several plants are selling at old prices as they have large stocks. There is no fixed price for cement in the UAE at the moment," he said.

 

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