Cement manufacturers in the UAE raised their rates as much as 15 per cent yesterday, drawing complaints from the struggling construction industry with contractors saying they cannot afford the increases.
"Our margins are extremely thin," said Matti Mikkola, the chief executive of Dubai Precast. "Anyone in the construction industry is just trying to survive."
Major cement manufacturers sent out notices last week advising clients of the increases. The new rates reflect a rise in electricity and production costs, manufacturers say.
The volume of cement production has also dropped dramatically in the wake of the construction downturn in the UAE.
Prices are now generally between AED200 (US$54.44) and AED250/t, far below the AED420/t manufacturers were charging during the building boom. The increases announced last week were on average about AED30/t.
The price rises will send ripples through a construction industry still reeling from the sharp reduction in development in the past two years.
"This is, in my opinion, irresponsible and short-sighted, especially at this moment in time," said Khalfan Saeed Jumma al Kaabi, the chairman of Ascorp Holdings and the first vice president of the Abu Dhabi Chamber of Commerce.
"We should not allow a small group to destroy or hinder the revival of the economy."
The UAE’s Ministry of Economy has capped cement prices in the past. But the current prices are below those levels, industry executives say. Overall, cement prices in the region dropped 13 per cent last year from 2009, ICR reported.
"The cement capacity build-up in the GCC and neighbouring regions, alongside a reduction in spending with lowered oil receipts, would place downwards pricing pressure on construction commodities across the whole region," ICR said.