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Cement shortage in UAE blamed on demand increase

Cement factories in the UAE blamed a shortage of cement on a sudden and sharp increase in demand on Thursday - and said production of raw material has been increased to meet new orders.

Industry experts said producers were expanding their facilities to try to meet demand - but new factories would not be on line for another year or more.

A senior official of RAK Cement, speaking on condition of anonymity, said its plant has been producing more than its capacity of 960,000 tonnes of clinker and one million tonnes of cement per year.

On Thursday, Emirates Business reported a black market in cement had emerged in the UAE amid a national shortage that threatened to delay construction projects. "Under the table" prices were Dh400 a tonne - Dh100 higher than the official price.

Union Cement , the oldest cement company in the UAE, recently stepped up production three-fold by incorporating a 10,000 tonnes per day clinker kiln. It now produces around 4.2 million tonnes annually, making it the largest cement producer in the country. Gulf Cement has added a second production line, increasing its clinker production capacity to 3.8 million tonnes per year. ETA Cement has been producing 3,500 to 3,600 tonnes per day in its Abu Dhabi units, 500 tonnes more than its usual capacity.

"The reason for the shortage is a sudden rise in demand. Several big contractors have tied up with cement companies making an agreement to supply almost 60 to 80 per cent of their production. It leaves the small-time operators including many ready-mix companies short of supply," said one official from RAK Cement.

In the UAE, cement consumption has jumped from 2.6 million tonnes per year in 1992 to 12 million tonnes in 2006. Last year, Ministry of Economy statistics showed the UAE used around 17 million tonnes of cement.

Last June, the Ministry of Economy fixed the price of cement at Dh295 per tonne. Major cement factories have questioned the government's decision and have asked officials to let market forces determine pricing.

However, the cap has not been effective as far as traders are concerned. Cement prices yesterday stood at Dh380 per tonne, a rise of almost Dh60 compared to February 17.

"The shortage can also be blamed on artificial control of prices. Let the government lift the cap and the situation will stabilise," said another senior official at a cement manufacturing unit.

However, major ready-mix companies on Thursday said their productivity has declined by almost 50 per cent because of the shortage of supply. A senior official of Al Ain Unibetton Ready Mix said ready-mix companies are losing almost Dh400,000 daily.

"We are wasting money on idle machines, power and manpower. The problem is faced by all companies and is more severe for small and medium ready-mix units," said the official.

Massive expansion plans are under way to increase the production capacity of cement factories in the UAE. The next two years will witness an increase in production levels by 20 per cent exceeding 50 million tonnes per annum by 2010.

Apart from cement, clinker production capacity is expected to grow by almost 64 per cent by next year to 25.5 million tonnes per year.

Some of the major expansion plans include a Star Cement project in Ras al Khaimah with a capacity of 1.8 million tonnes per annum Recently, Emirates International Investment Company announced plans to build a $409 million clinker factory in Abu Dhabi.

By Joseph George

© Emirates Business 24/7 2008