The impact of falling oil prices on the UAE cement industry: Harpreet Duggal, Black Rock Cement (UAE)

Filmed at Cemtech MEA 2015, 8-11 February, Grand Hyatt Dubai, UAE

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It looks like oil is the flavor of the season and I'll continue with the flavor. While Yuri talked about the impact on the global level then Hitesh trickle down to, narrow down to GCC. Now, I will further narrow down closer home which is the UAE market. We will look at what is the impact of the falling oil prices in UAE cement sector, but before that, I'll give you very quick round about of what has exactly happened.

Why are we seeing the falling oil prices as we do. What has been the impact of these oil prices in the global economy and then we would look at what has been an impact in the UAE economy and then finally, we'll come down to look at what is the impact at the bottom line in our factories in UAE. So what really happened?

So, actually if you look at this last about 10 years has seen very good oil prices and the oil exporting companies, especially the countries we come from here did very well. And with high oil prices going up, the revenue is improved, but what we see happen here is a sharp fall. Now, what did happen. Like we saw in the last decade year thanks to increased demand from China, thanks to growth emerging markets and demand went up whereas the supply were issues in Iraq, Arab springs, they were uncertainties. And all this led to US and Canada who were not looking at expensive sources of oil which is sale or oil sands.

Now, this suddenly became more attractive, they started looking at it and the supplies at the same time continued growing. US showed record production and in shale oil deal capacities increased to almost the same capacity to put it in perspective in last three years what US had increased in shale capacity is the same as the capacity for UAE as a whole.

So, huge capacities came in. Libya, Iraq, We were expecting it would kind of continue to be in problems but their capacities came on board. At the same time, the demand in China, Eurozone kind of started bittering off. So, we had a huge kind of stack pile of oil available, demands not picking up, supply side increasing tremendously, and prices slightly started to kind of fall. And it was expected that somewhere in November during the OPEC meetings, OPEC would take into account of the falling revenues and then they would shoot up the prices, reduce production which normally Saudi leads and it acts as it's free producer, but, in this case Saudi stayed back.

It did not kind of reduce prices and what has been the reason for Saudi? Was it a gamble which they had played? And whether it did work? Saudi saw that last time in '86 when there was a price fall, and they had kind of reduced production, it kind of impacted the market share, impacted the revenues, because their volumes came down, so sorry their prices, volumes came down.

So, this time they said we are kind of staying put and they were backed by the huge foreign exchange reserves which they had. So, they have reserves to last for another 10 years, so they're not worried that with reduced oil prices they put them back them. But at the same time they wanted to retain the market share, they want these new capacities which had come in here with shale oil, et cetera to price them out, get them out of production. And in the meanwhile in the next 4-5 years when these would be out, Saudi would again remain strong. Again, there is a Geo-political aspect also into this Saudi, the oil prices of Saudi has large

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