In April work on government-driven projects linked to the 15th Asian Games was forced to a halt for the second time in six months owing to a scarcity of cement in the local market. Although games organisers say that preparations for the two-week sporting event, scheduled for December 2006, remain on track, contractors have been hit by steep cost escalations. The cement shortage does not just cause delays, it has an impact on profitability, according to Raghib Kublawi, the general manager of Midmac Construction, a local private-sector firm that recently postponed the completion dates for some of its government projects.
Cement supply in the gas-rich emirate is controlled by the Qatar National Cement Company (QNCC), which enjoys a monopoly on local production. The firm also, until recently, maintained exclusive control over imports. After raising prices by 30% late last year, QNCC raised them by a further 15% in early May. Besides regular sales to around 100 contractors, the monopoly producer also sells to nearly 40 local retailers, which have, in practice, become another supply source for contractors. However, retailers who used to add mark-ups of less than 20% can now sell cement -- if they have any -- at 70% or more above the QNCC price, contractors said.
Until November, when the first shortage peaked, QNCC cement prices were stable for several years at QR9 (US$2.50) per 50-kg bag. The company now posts a price of QR11 per bag, although retail prices run up to QR 20 per bag.
QNCC’s chairman, Salem bin Butti al-Nuaimi, promised an end to the latest shortage by June. So far this year, the company has imported around ten cement cargoes of 17,000 tonnes each from India, while smaller amounts have arrived from Saudi Arabia, the UAE and Egypt. The firm recently signed a deal with a Pakistani supplier for another stream. Still, nobody knows how long the current shortage will continue, a QNCC production supervisor said.
In a change of policy, therefore, QNCC announced it would not block imports by other suppliers. The company, 43% state-owned, puts “national interests and the needs of the local market” ahead of profitability, QNCC officials said. However, contractors, who are expected to complete massive infrastructure projects for fixed fees, are questioning the cement monopoly’s role.