Cement prices seen declining in coming years, Jordan

Cement prices seen declining in coming years, Jordan
Published: 01 June 2007

Cement prices are likely to decline when two new producers enter the local market in the next two years.

The production capacity of the Qatrana Cement Factory, 90km south of Amman, is expected to reach 2Mta, according to Mohammad Othman, CEO of the Saudi-based Arabian Cement Company which will operate the Qatrana plant.

An expansion plan aims at raising the production level to 4Mta, Othman indicated.

He estimated the project will cost $400m and will provide more than 300 job opportunities for Jordanians.

"Based on two different feasibility studies, demand for cement in the Kingdom will double from the current level within the coming few years," Othman said.

The Arabian Cement Company selected KHD Humboldt Wedag for the design and supply of equipment to the factory which is expected to start operations in 24-25 months.

The Jordan Cement Factories Company (JCFC) has been waiting since last October for approval to use alternative energy in the production process but it did not yet receive any reply from the government, a source told The Jordan Times this week.

But JCFC stressed that prices will remain stable at its current levels after reaching an agreement with the government to reduce the prices by JD 4.64/t this week.

The government announced Thursday that it decided to maintain the current price of the heavy fuel oil used in the industrial sector, during this month. The price of heavy fuel oil remains at JD253/t, according to the government decision.

As such, rumours of a further hike in cement prices are unfounded and should stabilise the demand, a JCFC official emphasised.

On May 20, JCFC, the sole producer of cement in the Kingdom, increased cement prices by JD3.5 per tonne to counter a 12 per cent rise in the price of fuel oil which constitutes 70 per cent of cement production costs.

The hike caused a confrontation between investors in the housing sector and the government on one hand, and the company on the other hand.

However, earlier this week, the two sides made a deal under which the government cancelled the JD2/t special tax on cement and the company reduced the price by JD2/t.

Experts expect cement prices to start declining by next year as a new cement factory in Marfaq, 70km northeast Amman, begins operations.