With a large number of big ticket projects in the offing and a projected demand supply gap, Qatar could face a serious cement shortage scenario in the near future, cautioned a market analyst.Global Investment House (GIH) research analyst Faisal Hasan said Qatari companies are still not ready to gear up capacity to meet the future demand.
"Qatar National Cement Company announced a capacity addition of 0.93mtpa to 5.36mtpa recently. With no other major capacity addition announcements, GIH analysts feel Qatar has a major cement shortage scenario going forward", he said in GIH s latest report on "GCC Cement Sector".
Strong infrastructure spending by Qatar government will continue to boost demand for the cement sector. Total expenditure during 2013-14 has been set at $57.8bn, up 18 percent from $49bn set for the previous year. Furthermore, recent BMI report estimates that Qatar is expected to spend $140-150bn on infrastructure over the next decade.
"With such a huge number of projects in the pipeline, demand for cement is expected to shoot up. Average cement demand in Qatar during 2013-15 is expected to stand at around 5.5mtpa, higher than the government estimate of 2.5-4mtpa. With many big projects coming online thereafter, cement demand is expected to pick up further to 10.0mtpa", he said.
Talking about the pricing, he said cement prices in Qatar have remained mostly unchanged in the last couple of years. In 1Q13, average cement price in Qatar remained around the same at $70.1/tonne which was equal to the average in 2011 and 2012. The same prices have prevailed over the last couple of years because of government control. Due to increase in demand, prices may go up in the near term. However, Qatari companies have witnessed an improvement in their margins, which has been attributed to a shift to more efficient and operative environment.
The cement demand across the GCC is set to rise from 4-5 percent in 2013 to 6-7 percent in 2014. GCC s cement sector witnessed a broad turnaround last year, mainly on increasing construction activity across the region. "We expect the uptrend in demand to continue at least for the next 4-5 years, with further sizeable additions for high ticket projects related to World Cup 2022 in Qatar and World Expo 2020, which is expected to be hosted in Dubai.
As of 2012, cement grinding capacity in GCC totalled 117mtpa, while clinker capacity was around 88mtpa. Surplus at the clinker level is quite below, while that at the grinding level is in the range of 25-30 million tonnes. "With expected increase in demand for cement, we believe surplus at the clinker level will completely disappear, while that at the cement level will decline to 5-10milion tonnes by 2015-16. The drop would be aided by very few cement capacity expansions that would increase supply from 117mtpa in 2012 to 126mtpa by 2015".
