Sheltered from the excesses of the global downturn by an independent outlook and conservative banking regulation, Oman is pressing ahead with a series of infrastructure, airport and port developments.
Work is proceeding on schemes such as Duqm, a port and petrochemical complex, and Sohar Industrial Port. In the capital, a further $2.7bn is being spent on a new runway and terminal capable of handling 7m passengers a year at Muscat International Airport. Such projects might be expected to provide bumper opportunities for local cement producers – but they are not.
Instead, over the border in the United Arab Emirates, projects are being put on hold or cancelled. As a result UAE cement producers, which expanded rapidly during the years of plenty, are looking east to sell their product.
“There is huge excess [cement] capacity in the UAE and producers are trying to sell to export markets. Oman is the nearest export market where there is still high demand,” says an official at a leading UAE cement company.
The UAE’s proximity to northern Oman makes the sultanate an easy target for capacity overhangs. For example, Muscat is only a few hours’ drive from Hatta near Dubai.
Raysut Cement Company and Oman Cement Company, the sultanate’s two leading players, which have a combined capacity of 5Mt, do not have the muscle to compete with companies based in their larger neighbour.
The Emirati cement sector has a total capacity of 41Mt, but an official at a UAE cement company warned last week that consumption in the seven emirates is expected to fall to only 13Mt this year. As a result, even with the avenue of exporting to Oman, the UAE cement sector faces a wave of plant shutdowns.
Omani cement prices are about OR27-28 ($70-72) a tonne, but UAE factory prices are as low as OR20, resulting in a delivery price of OR24-25 when transport to Oman is included, analysts say.
As a result, Omani cement producers fear that Emirati exports will account for 27 per cent, or 1.2Mt, of the local market.
“The UAE market has created problems for us,” admits an official at Oman Cement Company. “There is stiff competition.”