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UAE tops per capita cement consumption, production

In absolute terms Saudi Arabia tops the GCC production and accounts for about 54 per cent of the total output of the region, followed by UAE which accounts for 24 per cent. But UAE is far ahead of Saudi in per capita consumption with 3 tonne while in Saudi it is below one tonne per capita.

Demand-side pressures on the UAE cement sector have grown in-line with a sustained construction boom over the past two years. The opening of the real estate sector to foreign ownership in recent years has spurred a boom in residential real estate development.

The majority of construction activity in the UAE is concentrated in Dubai and Abu Dhabi. In meeting construction activity requirements, cement demand has jumped from 2.6m tonnes in 92 to 8.0m tonnes in 2003. Per capita consumption, which remains the highest in the Middle East, stands at 3.1 tonnes. This figure has remained high in recent years despite the growth in population of the Emirates.

The demand is set to go up with the unabated construction boom. The market data shows a near 20 per cent jump in construction activity in 2005, with 20 per cent and 25 per cent growths in construction activity levels in Dubai and Abu Dhabi respectively. UAE cement producers have implemented capacity expansion plans in 2003, in anticipation of a surge in demand in the near-term. Gulf Cement has signed an expansion contract with Germany's Polysius and Thyssen Krupp India in order to add 0.9m tonnes/annum of capacity to its Ras Al Khaimah plant.

Union Cement has more drastic measures in mind, with a 2.5 million tonne/annum expansion through the addition of a new kiln to its production lines, effectively raising output potential by 90 per cent by 2006. Germany's Heidelberg Cement will act as consultant for the project, whereas bids for the implementation of the expansion are still open, with German, Japanese, Indian and Chinese companies still in the running for the contract. Furthermore, Sharjah Cement made announcements earlier this year that it is planning a 0.7m tonne/annum expansion to its cement producing capacity.

With 4.7m tonne of capacity due for delivery during 2006, the capacity of the domestic cement sector is expected to grow by 35 per cent in two year's time. The total of 7.4 million tonnes of capacity would be likely to meet local demand requirements in the medium-term. However, with $19 billion in contracts awarded for completion during FY 04 and 05, supply shortages will likely persist in the near-term, as UAE cement producers have and will continue to operate at near (or even above) full capacity.

The average time lag for the implementation of capacity expansions in the UAE is about 22 months with the earliest coming on-stream in H1 2005, through the Gulf Cement Company. The prevailing mismatch in domestic supply and demand conditions underscores the role of imports over the upcoming two years.

The Industry estimates show that the UAE currently imports no more than 5 per cent of its annual cement requirements, which for the year 2004 stand between 11 and 13m tons.

The price of cement in the UAE hit new highs in mid-FY 04 amid soaring demand form the domestic construction sector. Over an 18-month period ending in mid-FY04, prices rose 35 per cent. Currently, local cement prices have averaged Dh 15/bag (300/tonne), whereas bulk supplies are priced at around Dh280/tonne.