Cement market has reached 'critical stage'

The ongoing cement shortage in the UAE has reached a critical stage, with contractors being forced to buy cement on the black market.

CRISIS FOR THE INDUSTRY: Cement has become so scarce that construction companies are having to look to the black market to meet demand.
CRISIS FOR THE INDUSTRY: Cement has become so scarce that construction companies are having to look to the black market to meet demand.

The ongoing cement shortage in the UAE has reached a critical stage, with contractors being forced to buy cement on the black market.

Some contractors claim that cement suppliers have flatly turned them down, saying there was no cement left, while other contractors have said that cement is available, but only to the highest bidder.

Speaking to Construction Week, Ani Ray, country head for contracting company, Simplex Infrastructure said: "There is no cement left in the market. We've been to all of our cement dealers and none of them have anymore.

"According to our cement suppliers, 14 out of 17 cement manufacturers have said their plants are out of order.

Contractors are said to be paying around US $8.2 (AED30) for a bag of cement, almost double the capped price of $4.6.

"The crisis is worsening for sure," said Thomas Barry, general manager, Arabtec Contracting Company. "Very often we've had to pay in cash straight-up, just to secure cement. At the moment the situation is that the highest bidder to pay cash will be able to make a purchase.

The UAE economic department has put a cap on cement prices at around US $80 per tonne, but according to industry insiders, cement suppliers are demanding about $109 per tonne due to a rise in clinker, diesel and manufacturing costs.

Some companies are paying as much as $98 on the black market for a tonne of cement.

Chris Lobel, general manager, Ready Mix Concrete said: "We have already informed our clients that we will only be able to provide them with half of their current requirements due to the current shortage.

Lobel added that the rise in the cost of clinker was the main cause of the problem.

"A tonne of clinker is currently being sold for $85, which is more than the current cement cap, so cement manufacturers would be at a loss if you take into account the costs of producing cement. They have to grind it and manufacture it before they can sell it so it is raising their costs as well,"
he said.

According to Ray, the situation could be brought under control if the cap on cement is lifted, allowing market forces to come into play, along with the added costs being absorbed by developers.

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