The domestic demand for cement in the UAE has fallen by 30 per cent when compared to 2009 and by 45 per cent on 2008.
MEED surveyed 10 producers across the UAE. On average suppliers said they were now producing less cement than they were in 2009 because domestic demand has fallen by 30 per cent.
“The market for the whole UAE is down by about 30 per cent [compared to 2009],” an executive from a Fujairah producer says. “It is not just affecting us it is affecting the whole market.”
The fall in demand follows the slump in construction activity in Dubai since late 2008. According to MEED projects $290bn worth of projects are on hold or have been cancelled in the emirate.
“Dubai has collapsed and whether it will recover soon is anyone’s guess,” an executive from a Ras Al-Khaimah producer says. “In the short term I would definitely say that we are not expecting a recovery.”
The Ras al-Khaimah producer adds that due to the oversupply of the UAE market his company is now looking to export to other markets.
“Given that there is an overcapacity at the moment most companies are selling everywhere. We are exporting to Qatar and Oman at the moment.”
Other producers also say that the lack of demand in the UAE has made them look into other markets, although an executive from one Sharjah-based producer says that trying to become competitive overseas is not that easy for an industry that has been focused on domestic markets.
“I think everyone is trying to export, but when you look at the costing side I don’t think the UAE is as competitive as other countries,” he says. “Just bagging up 3,000 tonnes-a-day (t/d) is going to pose problems. We have always serviced the local market so we cannot just agree to send 3000-t/d of bagged cement overseas,” he adds.
The drop in demand has also affected cement prices in the UAE and has led to a volatile market. Prices have fallen to between AED180 ($49) and AED220 a tonne from an average of around AED290 a tonne in 2009.
“Although we are still producing, the low prices means that we are well down on previous years,” an executive from another Ras al-Khaimah producer says. “Cement is a commodity so you have to sell it, but the prices are reflecting an oversupplied market [in the UAE] at the moment.”
Other producers also voiced concerns about the volatile prices and most say that the current slump in demand has caused some companies to quote low prices out of desperation.
One emirate, however, where the producers see growth potential is Abu Dhabi. According to MEED Projects $3.1bn worth of construction contracts and $7.5bn of oil, gas and petrochemical projects have been awarded in the emirate so far in 2010.
“There is a lot of optimism as far as Abu Dhabi is concerned due to the tremendous value and size of the projects coming up,” an executive from an Abu Dhabi producer says. “Cement companies in Abu Dhabi will be in a great position to offer the best deals.”