Cement prices to rise from February 1

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.”

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