The real estate boom in the UAE is set to hit a major roadblock that could seriously affect the completion of projects across the Emirates.
The problem lies with companies that supply ready-mix concrete.
Representatives of these suppliers yesterday told Emirates Business that they are struggling with a huge backlog of orders due to a massive shortage in the supply of cement.
Companies have issued their clients notices that they are not in a position to supply more than 45 per cent of the ready-mix orders. In some cases, ready-mix companies have even ceased production.
Contractors are worried that the shortage might cause another hike in cement prices in the country. The shortage of cement and the subsequent lack of concrete also risks causing a delay in the delivery of some projects if the situation persists.
The industry, well aware of the problems, painted a gloomy forecast if the situation did not change soon.
“We are already feeling the pinch and if this situation continues, we are bound to see more delays in delivery of projects,” said Ibrahim El Hamadi, executive director of Arabtec Construction.
The shortage has been triggered by the high cost and lack of cement, according to ready-mix producers.
In the past week itself, cement prices in the country have gone up by 25 per cent with factories arguing that it is a direct result of increasing oil prices in the region having a knock-on effect.
Crisis as cement shortage hits UAE industry
Ready-mix concrete supply companies in UAE are struggling with a huge backlog of orders from contractors as a massive shortage of cement hits the country.
Firms have issued their clients with notices that they will be unable to supply more than 45 per cent of the ready-mix orders as they attempt to deliver supplies to their contracted clients.
The shortage – triggered by the high cost and lack of cement – has forced some ready-mix companies to cease production.
“We need cement to do our work, but since yesterday we have failed to get any, meaning that our production has been zero for two days,” said a managing director of one of the ready-mix companies in the country.
“I have over 20 trucks queuing at the cement factory and none have been able to go through due to the long queue. All factories have been constrained,” he added.
The managing director of another ready-mix company told Emirates Business its daily concrete production capacity had dropped to 40 per cent in the past two weeks and was likely to slide further. None of the ready-mix companies interviewed would agree to have their names used in this article.
Contractors are worried that the shortage might cause another hike in cement prices in the country. The shortage of cement and the subsequent lack of concrete also risk causing a delay in the delivery of some projects if the situation persists.
Some contractors have asked ready-mix companies to provide them with concrete at any cost in a bid to complete projects currently running behind schedule.
“The shortage in cement as well as concrete is a big threat to our projects. We are already feeling the pinch and if this situation continues, we are bound to see more delays in delivery of projects,” Ibrahim El Hamadi, executive director of Arabtec Construction, said.
El Hammadi said contractors were currently waiting for government intervention on the issue as it risks descending into a crisis. “It is difficult for us to manage our work with the current situation. We are trying to entice suppliers and cement factories with direct payments and also trying to use influence, but this can not be sustained for a long time.”
In order to cope with the huge demand for concrete, some ready-mix companies are looking to cement imports as a viable option, regardless of the high cost.
“We are ready to import cement at whatever cost because it is a necessity. If the situation persists, I think this will be the only available option to us,” said a manager of a ready-mix company based in Dubai.
He said the shortage in cement had already caused an increase in operating costs, which had forced most companies to increase prices of concrete by an extra Dh40 per cubic metre.
He noted it was difficult to increase prices where contracts with clients exist, and that in such situations, ready-mix companies are taking on all the losses.
According to industry sources, the shortage is mainly being created by the demand-supply imbalance resulting from the massive construction projects going on throughout the country.
“Supply of cement at the existing factories has been constrained by the huge countrywide demand. Its becoming increasingly hard for factories to keep pace with the fast-growing demand,” said Bryan Richardson, a Dubai based consultant on construction and real estate development.
Meanwhile, Imad Al Jamal, vice-president of the UAE Contractors Association acknowledged the shortage and said the problem could only be resolved if three steps were taken.
“First, there should be a readjustment in the schedule of the projects to push back delivery, second cement factories should expand their production capacity and third, contractors should start looking into importing as a solution to the current situation.”
The problem has been worsened by the breakdown of machinery at four major cement factories in the country, putting further pressure on other factories.
Just in the past week, cement prices in the country have gone up by 25 per cent with factories arguing that it is a direct result of increasing oil prices in the region having a knock on effect.
Shortage of cement hits ready-mix firms