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Cement prices seen declining in coming years

AMMAN -- Cement prices are likely to decline when two new producers enter the local market in the next two years.

The production capacity of the Qatrana Cement Factory, 90 kilometres south of Amman, is expected to reach two million tonnes per year, according to Mohammad Othman, CEO of the Saudi-based Arabian Cement Company which will operate the Qatrana plant.

An expansion plan aims at raising the production level to four million tonnes per year, Othman indicated.

He estimated the project will cost $400 million and will provide more than 300 job opportunities for Jordanians.

"Based on two different feasibility studies, demand for cement in the Kingdom will double from the current level within the coming few years," Othman said.

The new factory in Qatrana received approvals to use either the heavy fuel oil or petcoke, according to Othman.

The Arabian Cement Company selected the German industrial group KHD Humboldt Wedag for designing and supplying equipment to the factory which is expected to start operations in 24-25 months.

The Jordan Cement Factories Company (JCFC) has been waiting since last October for approval to use alternative energy in the production process but it did not yet receive any reply from the government, a source told The Jordan Times this week.

But JCFC stressed that prices will remain stable at its current levels after reaching an agreement with the government to reduce the prices by JD 4.64 per tonne this week.

The government announced Thursday that it decided to maintain the current price of the heavy fuel oil used in the industrial sector, during this month. The price of heavy fuel oil remains at JD253 per tonne, according to the government decision.

As such, rumours of a further hike in cement prices are unfounded and should stabilise the demand, a JCFC official emphasised.

On May 20, JCFC , the sole producer of cement in the Kingdom, increased cement prices by JD3.5 per tonne 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 investors in the housing sector and the government on one hand, and the company on the other hand.

However, earlier this week, the two sides made a deal under which the government cancelled the JD2 per tonne special tax on cement and the company reduced the price by JD2 per tonne.

Experts expect cement prices to start declining by next year as a new cement factory in Marfaq, 70 kilometres northeast Amman, begins operations.

By Khalid Neimat

© Jordan Times 2007