Out of control

It was around this time last year when contractors were saying that a dire shortage of cement was forcing them to pay double the price per tonne.

Contributing to the cement producers' profit was seen as a more favourable option to incurring penalties for project delays.

The shortage and soaring cost was also putting many off from taking projects on altogether.

At the time, the blow was cushioned by the optimism that new facilities expected to come on stream this year in Ras Al Khaimah and Fujairah would level out the playing field, leading to a situation whereby all projects would be served by locally-manufactured cement.

But it didn't take long for this optimism to become shrouded in doubt later in the year as fresh concerns were raised that the new capacity, coupled with manufacturers ramping up their production to meet demand, would lead to an oversupply and export challenges.

Whether there's now a surplus or not, what the situation has instead provoked is disarray in a vastly unregulated market that manufacturers and, in a sense, contractors are taking advantage of.

On the one hand, contractors are hurling accusations that cement producers are hoarding their precious supplies under the guise of production facilities 'undergoing maintenance' - who can blame them when the market has turned into a domain for auctioning. In the short-term, it makes sound business sense.

The accusations have also extended to foreign steel producers, whose products could fetch US $1,000 a tonne at the least, in the UAE in April.

On the other hand, contractors are marking up their project values in bids, with developers grimacing at bearing the brunt.

While measures such as scrapping duty on steel and cement imports allow buyers to turn to foreign markets, price caps have blatantly been ignored.

A similar situation that hit the UK industry early last year prompted an official investigation into malpractice and unfair competition, leading to the prosecution of companies operating a cartel.

With demand for essential cement and steel products set to be fuelled by further real estate growth in the region, maybe the UAE needs to take a similar stance before the situation gets completely out of hand.

Print | Email | Discuss this article |

USER COMMENTS (1 COMMENTS)

POST A COMMENT

Out of control
Posted by Firozali A. Mulla MBA PhD, DUBAI, UAE on 7 April 2008 at 17:32 UAE time

The only problem that is with us when there is a short-term supply issue, panic, and hoarding increase. That is for every commodity.

CLICK HERE TO POST A COMMENT

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.