Massive shortage Stokes Black Market For Cement
A black market for cement has emerged in the UAE amid a national shortage that is threatening to delay construction projects, Emirates Business has learned.
Cement is currently being sold under the table for more than Dh400 per tonne – more than Dh100 over the official price at cement factories.
The cement black market is riding on the high demand for cement as contractors struggle to complete projects on schedule despite the shortage. “We saw a cement black market [emerge] due to shortages in previous years and we are seeing it again now as the shortage of cement continues to hit hard,” said Zaher Hamad, managing director of Delta Ready-Mix company in Sharjah.
Currently, the official factory price for cement is Dh295 per tonne, however, only a few companies have managed to buy cement at that price. A senior official at Unibeton Ready-Mix told Emirates Business contractors were desperate to have orders delivered on time to meet deadlines on projects under construction. He said his company had not been able to meet the level of demand for concrete by contractors.
Some contractors are now willing to pay any amount of money to buy cement as they attempt to salvage their reputation.“It is clear that there is a desperate need for cement and this had given birth to the black market, which intends to take advantage of the situation.
During the cement shortage in 2004, there was a similar black market,” said a managing director at a ready mix company in Dubai.
There are fears the current price on the black market could shoot up further if the shortage persists. Over the past few days, some ready-mix companies have increased the price of concrete by an extra Dh40 per cubic metre.
Ready-mix companies play an important role in the construction process as they are tasked with the manufacturing of concrete blocks and paving slabs. Contractors rely on products from ready-mix companies for most of their projects and anything that affects them directly impacts on contractors.
Some ready-mix companies are beginning to import cement from China, Indonesia and India in order to clear a backlog of orders from contractors. “We have decided to import cement from Indonesia and this would cost us about Dh380 a tonne. We feel it is a viable option for us at the moment,” said Zaher Hamad, managing director of Delta Ready- Mix in Sharjah.
Further exacerbating the shortage is the fact four cement factories in Ras Al Khaimah and Fujairah have not been running for the past two weeks following machinery failures. However, two of them confirmed repairs were being made and they would resume production in two weeks, although industry experts said this will not help to completely solve the shortage.
Meanwhile, operators of some ready-mix companies suspect the current shortage is being artificially created by cement manufacturers in a devious attempt to hike prices of cement. Prices have been increasing since last year, the latest being last week, when a 25 per cent increase was implemented.
A number of new cement factories have opened up in the UAE over the past three years in a bid to boost production capacity to meet current and future demand. Last year, Union Cement Company commissioned a 10,000 tonnes per day clinker kiln to triple its annual capacity from 1.2 million tonnes to 4.2m tonnes at a cost of Dh1bn.
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