UAE markets: a challenging scenario?

UAE markets: a challenging scenario?
Published: 22 January 2010

The recent glitzy opening of the world’s tallest building, the Burj Khalifa in Dubai, more news of massive debt rescheduling by Dubai’s Arab leaders and now confirmation that the regional UAE cement capacity will increase by a further 19 per cent by 2011, all set the scene for the forthcoming Cemtech Middle East Conference & Exhibition to be held in Dubai between 13-16th February with over 200 international industry experts in attendance.

What will they learn?

Well, local cement capacity - already a respectable 34Mta - will grow to 40.6Mta within the next 12 months and with a number of major building projects either put on hold or cancelled, producers are holding out for a swift revival in local economics or looking outside the UAE for more amenable export markets.

According to recent research, the nine listed local cement companies with some 60 per cent of total capacity will boost their totals by almost 5Mt following expansion work. Recently Arkan Building Materials raised its cement production capacity from 1.2Mta in 2008 to 5.7Mta by 2009, while Fujairah Cement Industries has also boosted its production capacity to a sizeable 4.6Mta in 2009 from an earlier 2.2Mta level.

With the local UAE cement market expected to have dropped by over 11 per cent last year, according to figures produced by the influential Global Investment House, clearly something will have to give.

And with 14Mt of unlisted cement capacity also vying for a reasonable market presence, further pricing pressures and a decline in overall utilisation rates are to be expected. Some mothballing of production facilities is also not an unrealistic prospect, particularly if fuel and energy costs are allowed to rise, although as noted, some producers in the northern emirate of Ras Al Khaimah, for example, RAKCC, Union Cement and Gulf Cement are all favourably placed for regional export sales if and when required.

Talking with local producers, most remain stoic over short-term prospects, citing the point that their industry has experienced similar market fluctuations over the past 20 years; and while the capacity surplus might rise to almost 10Mt next year, they remain generally positive of a swift reversal in revenue and profitability trends. And with the dominant emirate of Abu Dhabi sitting on very sizeable reserves of oil and gas, who could blame them for their continued optimism.