Government urged to allow use of alternative fuel in cement production, Jordan

Government urged to allow use of alternative fuel in cement production, Jordan
Published: 31 May 2007

The private sector on Wednesday warned of another hike in cement prices next month in Jordan, if the government does not adopt mid- and long-run solutions, rather than "postponing the problem" through temporary measures.

Jordan Cement Factories Company (JCFC), Jordan Construction Contractors Association (JCCA) and the Association of Investors in the Housing Sector called on the government to allow the use of alternative fuel resources.

Such an approach would lower the production cost for the cement industry and would stabilise the market, the JCFC said.

On May 20, JCFC increased cement prices by JD3.5/t 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 the investors in the housing and construction sectors and the government on one hand, and the cement company on the other.

However, the government and the JCFC reached an agreement to reduce the prices by JD4.64/t this week.

"Jordan Cement submitted the results of its experiment on the use of oil shale in production since October last year and has not yet received any reply," JCFC General Manager Rashid Ben Yakhlouf said.

"We believe that to better monitor cement prices, we must use alternative energy sources rather than fuel oil," he added. "The environmental effect from using oil shale was also examined, showing no negative results and this was communicated to the government."

Ben Yakhlouf said the company has been waiting for a reply since October 2006.

According to the general manager, the company has spent JD20m to examine the possibility of using alternative energy resources like oil shale and natural gas in the production process in its factories.

"But it [the government] has not moved a step forward in this regard for reasons that we do not have anything to do with," he added.

"We suspect a conspiracy against the JCFC from some parties in the country," a source, who asked not to be named told The Jordan Times.

The government licensed two new cement factories, one in the Qatraneh, 85km south of Amman, and the other in Mafraq, 75km northeast of the capital.

The source said that the JCFC has been providing practical solutions to maintain cement prices at competitive levels with neighbouring countries.

But "no one has shown us any positive attitude towards our attempts. Hence the situation remained the same and we had no choice but to increase the prices by JD3.5/t".

"Our profits have been declining for the past two years," Ben Yakhlouf said, noting that even this year the situation is worse when comparing the first quarter results with the same one in the last year. There is a drop of nine per cent in profit, he pointed out.

JCFC profits dropped from JD67m in 2005 to JD55m in 2006, a decline of 18 per cent within one year. This was due to the hike in fuel oil prices and the company’s reluctance to raise the price of cement, but to look for alternatives, the source said.

"When the government decided to cancel the special tax on cement, which was JD2/t, we also reduced JD2/t from the cost," Ben Yakhlouf said. "But we believe this is not a permanent solution to the problem."

The Association of the Investors in Housing Sector warned of a collapse in the sector if the market of building materials was not properly managed and monitored.

The association urged the government to intervene and end the current agreement among the producers and suppliers of construction steel. It noted that prices were sharply hiked in the last few months and that the current price of steel in the market is JD560/t compared to JD215/t three years ago.