Beleaguered Omani cement producers will be able to raise prices by 2013 as dumping from the oversupplied UAE market slows and demand improves domestically and abroad, according to analysts.
A BankMuscat research report said that the drop in domestic price realisations took a 'halt' in the first quarter this year after six quarters of continuous declines, while the export realisation uptick came as a positive surprise.
The report said, "Realisations have largely stabilised at the current level and we expect a marginal uptick from the first half of 2013. At current costs, there is little room for UAE manufacturers to lower their prices, which provides a strong base for realisations to bottom out in Oman.
"For 2012, we expect Raysut's domestic realisation to be RO27 per tonne and Oman Cement's domestic realisation to be RO25.8 per tonne.
"We expect realisations to inch up in 2013."
The decline in prices began after both companies lowered prices from RO31 per tonne in July 2010. Average prices declined to RO25 per tonne for Oman Cement and to RO26.8 per tonne for Raysut Cement in the fourth quarter last year.
Demand for Oman Cement products continues to increase, with total sales reaching 558,000 tonnes in the first quarter of 2012, the highest quarterly volume in the last three years.
Raysut Cement delivered 666,000 tonnes to customers in the first quarter, the highest since the second quarter of 2010.
While Raysut's domestic volumes grew ten per cent in the first quarter, its exports jumped 45 per cent to 308,000 tonnes.
Arafat al Said, head of research at National Securities, said that UAE cement producers are now focusing on the Saudi market instead of Oman due to shortages and better prices in the largest Arabian Gulf economy.
He said, "Saudi cement companies have also stopped exports. The dumping from neighbouring markets into Oman has already come down significantly. There has been an improvement in prices as well as volumes of Omani cement this year."
"However, we are expecting a marginal uptick in cement prices this year, but they have stabilised at current levels. Cement factories are working on higher utilisation - so revenues are expected to rise substantially in the second quarter."
© Muscat Daily 2012
