Given the pace of construction in the UAE, demand for cement is expected to increase by up to 15 per cent every year for the next five years, raising prices for the commodity during this period, according to a industry study conducted by the Emirates Industrial Bank.
The study predicts that a decline in prices could be expected only when projects to increase cement production go on stream.
According to the study, demand rose to around 12Mt in 2006 from 7Mt in 2000. The UAE has a production capacity of 13Mt
With the industry expanding and new plants being constructed, several million tonnes per annum capacity is expected to be added in coming years.
However, as it takes two years to implement capacity expansion plans, increase in capacity hasn’t really been able to match the rising demand, leading to higher prices.
Currently there is at least one cement factory in every emirate. The UAE cement factories produce Portland cement, white cement and clinker.
Cement production rose by 61 per cent during 2000-04, while clinker production has shown less impressive growth, rising by just 16 per cent in the same period. Though prices of other raw material have increased, price of cement has doubled between 2003 and 2005. Government support has been made available in waiving off duties to ease the prices as well as reducing port handling duties.
Moreover, rising cost of cement has led construction contractors to include clauses in their contracts to account for any cement price contingencies. Construction firms with long term contracts have profited from the earlier agreed lower prices, says the report.
Current shortages have led to rise in cement and clinker imports. Imports meet only 5 per cent of the demand and are a stop-gap arrangement it is not suited due to high transportation cost and damage because of high humidity.