Muscat:Oman s cement companies are likely to benefit from a reduction in dumping by the neighbouring UAE producers and better demand for cement from within the country this year,said a top-level analyst.
The Sultanate s two cement producers—Oman Cement Company and Raysut Cement Company—have been complaining of dumping by the UAE firms,after these cement producers faced a glut in demand in their domestic market four years ago in the aftermath of global financial crisis.
The two Omani cement makers produce around 6.2 million tonnes a year,which is against the UAE s annual production of 41 million tonnes.Of late,Raysut Cement Company has urged the government to clamp strong anti-dumping measures on cement producers from the UAE to maintain prices in the domestic market.The Omani firm said a truck should not have more than 5,000 tonnes of cement and total exports from the UAE should not exceed 30,000 tonnes per month.
"With Saudi opening up its market,most of the UAE producers have diverted from Oman to Saudi(market),"said Sankar Kailasam,Head of Asset Management,Gulf Baader Capital Markets.
However,he noted that with the opening up of the Iran market,there is a threat for cement producers in the region."Iran has a cement production capacity of 40 million tonnes per annum,which is a threat for regional cement companies,"he added,while making a presentation on GCC economy and market outlook.
Kailasam said the Gulf region has been facing an over supply in cement market as the over all demand for cement is around 100 million tonnes,while production is around 110-115 million tonnes per annum.
"Several cement producers in the region have expanded capacities during the last boom period.For instance,the UAE firms have increased the overall cement capacity from merely six million tonnes to 41 million tonnes,"kailasam said,adding;"So,the pressure in terms of realisation continues as far as the UAE firms are concerned.Net margin levels of the UAE firms stand merely at nine per cent,whereas Saudi firms have 49 per cent net margin."
"The annual growth in demand for cement in the Gulf region is projected at 6-7 per cent during 2013-16 period.The demand to remain strong in the region and realisation is also improving."
Kailasam said the cement prices in the region averaged around$65.1 per tonne last year,showing a decline of 1.8 per cent over the previous year due to lower realisation in the UAE.However,the net profit of GCC cement producers increased by 11.5 per cent for the first nine months of last year,thanks to strong demand growth in Qatar and Saudi Arabia.
He also noted that project spending remained strong in the region with projects in the pipeline to the tune of$2.4 trillion by end-September,2013.Project spending in Saudi Arabia are estimated at$1 trillion,followed by the UAE at$750 billion and Qatar at$270 billion.
The Sultanate s total project spending to remain robust at$140 billion.
Gerhard Schwarz,head of strategy,Baader Bank(Germany),also presented a paper on global strategy and outlook.Pradeep Asrani,managing director of Gulf Baader Capital Markets,also attended the event.
