Cement prices continue to vary despite MoE advisory

Factories in the UAE are continuing to sell cement at varying prices despite a move by the government against raising the minimum price, Emirates Business can reveal.

Last week, cement manufacturers in the UAE were advised by the Ministry of Economy not to increase the minimum price of loose cement.

Following the announcement, the UAE Contractors' Association had called on cement producers in the country to withdraw their earlier decision of increasing the minimum price of loose cement to Dh220 per tonne.

In January, the UAE Cement Manufacturers' Association had agreed to set the price at Dh250 per tonne in Abu Dhabi, Dh240 in Dubai and Dh220 in the Northern Emirates, from February 1.

Emirates Business called various factories in different emirates over the past week and found that cement was being sold for as low as Dh195.

A call to the Dubai office of the Abu Dhabi-listed Arkan Building Materials revealed the company was buying cement at around Dh195-200 per tonne, depending on the type of cement.

Sharjah Cement Factory said it was selling cement at Dh230 per tonne, while a sales agent from Jebel Ali Cement in Dubai confirmed that they were selling cement at Dh235 per tonne, without transport.

Readymix companies confirmed that they were purchasing cement between Dh220-245 per tonne. Al Azani Ready Mix Company said it was purchasing cement at various prices, averaging Dh230 per tonne, while Ready Mix Gulf said it was buying a tonne of cement for Dh245.

Meanwhile, the Director-General of Ministry of Economy Abdulaziz Al Shihhi came down heavily on the price-fixing mechanism and creating a monopoly block. According to him, cement producers are not allowed to agree on the price unilaterally, and that market forces should take their natural course.

Abdullah Mohammed Al Sayyah, head of the Cement Manufacturers' Association in the UAE and General Manager of Union Cement Company, said the decision to set cement prices was an effort to stabilise the rates.

"We are not trying to raise the price. The prices that were agreed upon reflect the increased cost of production. Currently, the market price is Dh220. It differs according to the transportation cost," said Al Sayyah.

According to him, cement prices have dropped significantly since the beginning of 2009. "Last year in January, cement was priced at Dh340 per tonne. However, by the end of the year, prices had dropped due to a drop in demand. By the end of 2009, the production cost went up following an increase in electricity and other utilities including oil. Therefore, we are trying to stabilise the price," he said.

"I would imagine 2010 to be worse than 2009," he said. "While the consumption of cement in the UAE last year was 18 million tonnes, in 2010, the projection does not exceed 14 million tonnes," he said.

Abu Dhabi's Al Falah Ready Mix said it was finding it very difficult to convince customers of the new price structure, while Ajay Mathur, General Manager at Emirates Thermostone, said it may not be the best time for factories to increase prices.

"There are many small players and clinker grinding plants who are still applying lower prices. This is not the right time for cement companies to increase prices since the overall construction activity in the UAE is still under pressure. As a manufacturer, I would ideally like the prices to either go down or maintain their previous level," said Mathur.

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