Oman feels weight of cement influx

Oman feels weight of cement influx
10 September 2010

Sheltered from the excesses of the global downturn by an independent outlook and 
conservative banking regulation, Oman is pressing ahead with a series of
 infrastructure, airport and port developments.

Work is proceeding on schemes such as Duqm, a port and petrochemical complex,
 and Sohar Industrial Port. In the capital, a further $2.7bn is being spent on a
new runway and terminal capable of handling 7m passengers a year at Muscat
 International Airport. Such projects might be expected to provide bumper
 opportunities for local cement producers – but they are not.

Instead, over the border in the United Arab Emirates, projects are being put on
hold or cancelled. As a result UAE cement producers, which expanded rapidly
during the years of plenty, are looking east to sell their product.

“There is huge excess [cement] capacity in the UAE and producers are trying to
sell to export markets. Oman is the nearest export market where there is still
high demand,” says an official at a leading UAE cement company.

The UAE’s proximity to northern Oman makes the sultanate an easy target for
capacity overhangs. For example, Muscat is only a few hours’ drive from Hatta
near Dubai.

Raysut Cement Company and Oman Cement Company, the sultanate’s two leading
players, which have a combined capacity of 5Mt, do not have the muscle to
compete with companies based in their larger neighbour.

The Emirati cement sector has a total capacity of 41Mt, but an official at a UAE 
cement company warned last week that consumption in the seven emirates is
 expected to fall to only 13Mt this year. As a result, even with the avenue of
exporting to Oman, the UAE cement sector faces a wave of plant shutdowns.

Omani cement prices are about OR27-28 ($70-72) a tonne, but UAE factory prices
are as low as OR20, resulting in a delivery price of OR24-25 when transport to
Oman is included, analysts say.

As a result, Omani cement producers fear that Emirati exports will account for
27 per cent, or 1.2Mt, of the local market.

“The UAE market has created problems for us,” admits an official at Oman Cement
 Company. “There is stiff competition.” 
Published under Cement News