Price crisis fails to deter further expansion

11 November 2005
The local Tal Khavar Cement Companyhas issued a tender for the construction of a new cement plant with capacity of 1.2 million tonnes a year (t/y) in Khouzestan province in the southwest. Two other contracts to supply key equipment to new plants have been let to Germany's Polysiusas a wide-ranging expansion, fuelled by spending from the Oil Stabilisation Fund (OSF), comes into force (Construction, MEED Special Report, 13:5:05, pages 56-57).

Bids for the latest project, which will be carried out on an engineering, procurement and construction (EPC) basis, are due on 21 November. The project will be developed 200 kilometres from Ahwaz and will take 36 months to complete.

On two separate projects, Polysius will supply the main components to Sarooj Bushehr International Companyfor a planned 2.2 million-t/y facility, and to Neyzar Qom Cement Company, which is building a 1.2 million-t/y cement plant. Each of the plants is being part-funded by low-interest loans from the OSF.

The plants are part of a wider expansion scheme, with OSF allocations so far made to more than 35 prospective projects. Iran aims to double its production cement capacity to more than 70 million t/y by the end of the fourth five-year development plan in 2010.

Cement companies account for the single largest sector on the Tehran Stock Exchange but - over the past year and a half - they have seen their average share prices fall by about 40 per cent, reflecting difficult times in the sector.

The problems are partly the result of the new expansions under way, raising concerns among investors that the market could become oversupplied, leading to a drop in cement prices. However, at the moment, product prices are very high, partly because of shifting government positions on export regulations and subsidies. Black market cement prices are twice the official rate.

Industry analysts hope less construction activity in the winter will help reduce demand and allow prices to fall. The Economy & Finance Ministry has proposed enacting new legislation putting all cement sales on the Tehran Metal Exchange. Prices are now set by the government and are some way below international prices.

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