The UAE’s cement capacity will increase by 19 per cent in 2011, according to a latest Global Investment House (GIH) report.
"UAE’s current cement capacity at 34mtpa (20mtpa of listed cement manufacturers and remaining of the unlisted cement companies) is expected to increase to 40.6mtpa (24.5mtpa of the listed and 16.1mtpa of the unlisted companies) by 2011. Such a growth in capacity would give rise to multiple problems provided economic revival comes up with the continuation of the big ticket projects," it said.
"Based on our universe, the sector profitability is expected to show a decline in 2009, mainly because of a drop in realisation prices, expected decline in utilisation rates and a majority of projects being put on hold. However, we believe that certain cement players would continue to perform well due to favourable cost structure and advantageous location."
Out of the nine listed cement companies in the UAE, two have recently completed their expansion.
Arkan has raised its cement production capacity from 1.2mtpa in 2008 to 5.7Mta by 2009 while Fujairah Cement Industries has raised its production capacity to 4.6Mta in 2009 from 2.2Mta earlier.
Share of the listed cement companies, which currently stands at 60 per cent, is estimated to remain same this year, while major cement players such as Arkan Building Materials, Union Cement Company and Fujairah Cement Industries would account for 36 per cent of the market this year.
In the unlisted segment, majority of the cement players will come with a full fledged production in 2010, which will further exaggerate the already glutted cement market.
Unlisted companies, whose current share of the total market is estimated at 40 per cent, are likely to remain same by 2010.
Major newcomers with capacity of more than 2Mta are Sharaf Group Cement Factory and National Cement Factory, said the report.