This time, the cycle threatens to turn vicious. Across the Middle East, cement producers are investing in huge capacity additions to meet the project timetable for the next five years – a workload worth just shy of $1 trillion in the GCC alone. But analysts say the proposed doubling of capacity could lead to major inventory overhangs in as little as three years. Producers are already looking at exports as a way of hedging against a possible downturn. But with rival producers in Asia facing similar supply gluts, the long-term viability of Gulf cement exports is in serious question.

On first impressions, the regional market looks in rude health. As of 25 June, MEED Projects was tracking some $988,303 million worth of projects in the GCC. More than $400,000 million worth of real estate projects are currently under development, with Dubai blazing the trail. ‘Much depends on its success,’ says Raghu Sarma, senior financial analyst at Global Investment House.

As a result, cement is an increasingly precious commodity. GCC per capita consumption today stands at three times the global average. The Gulf contained the four biggest cement consumers in the world in 2005, according to UK consultant Sustainable Business Services (SBS), with the UAE market absorbing some 2.9 tonnes of cement for every inhabitant. Kuwait and Qatar follow closely behind, with 2.8 tonnes and 2.5 tonnes per capita respectively. By comparison, cement consumption in the industrialised world is usually well below 1 tonne per capita.

The construction boom of the last two years has already turned the Gulf into a net importer of cement. Total capacity in the GCC stood at 42.7 million tonnes a year (t/y) in 2005, compared with 44.1 million t/y of production and consumption of 48.8 million t/y. Much of the shortfall is coming from neighbouring markets, such as India. In the rest of the Middle East and North Africa, the total installed capacity of about 99.5 million t/y outstrips actual production by 35 per cent. Egypt has become a major cement exporter, targeting European markets in particular.

‘In the near term, it looks as though consumption is going to grow faster than even the most urgent desire to increase capacity,’ says Ken Rumph, cement analyst and consultant at SBS. ‘When those two lines [supply and demand] cross over, whether it’s 2008 or 2009, if projects don’t get delayed and if capacity additions are late, as they often tend to be, cement prices and the construction market are going to look very good.’ Nevertheless, those remain big ifs. ‘After that, [it’s unclear whether] the high rate of spending will continue.’

And the picture for some Gulf cement producers is already beginning to look hazy. Saudi Arabia, where producers enjoyed net profits of $842 million on revenues of $1,700 million last year, is likely to become a net exporter of cement in 2007, according to Global Investment. However, rapid plant expansions, which could bring eight new players into the Saudi market from 2007, could create the conditions for a price war towards the end of the decade. SBS predicts that capacity in the UAE will stabilise in 2009 at around 28 million t/y, while consumption will peak at just under that figure in 2008, before dropping dramatically to about half that by 2011-the classic oversupply scenario.

Overall, GCC production is set to soar fr