TROUBLE BREWING: Some contractors believe that speculation and hoarding by cement and steel producers is at the root of escalating costs.

DISASTER ON THE HORIZON: Many contractors will be out of pocket if something isn’t done.

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Crisis point

With the prices of essential building materials going through the roof, is the contruction industry heading for a crisis? Conrad Egbert takes a look.

Over the past month the price of cement and steel has shot up, causing serious inflation in the market.
April will see cement selling for more than US $109 (AED400) per tonne, while steel could fetch more than $1,000 per tonne, according to sources on the Dubai Gold and Commodities Exchange (DGCX).

Last month, a tonne of cement was being sold at $85 per tonne and steel at $980 per tonne.

Some contractors believe that speculation and hoarding by cement and steel producers is at the root of escalating costs.

According to Riad Kamal, chairman, Arabtec Holding, even though there is a genuine shortage of cement globally, the UAE produces 90% of its cement needs, so it has no reason to experience such inflationary pressures.

"Many of us feel that cement producers are taking advantage of the situation and are cutting supply so that the prices will go up," he said. "According to what I know, seven factories have shut production, apparently for maintenance.

They're also aware of the fact that importing cement requires special handling and storage facilities at ports that are unavailable to local contractors and will take time to develop."

Seconding Kamal's views, country head for contracting company Simplex Infrastructure, Ani Ray said he was faced with "fourteen out of 17 cement companies who said their plants were out of order".

Dubai decided a fortnight ago to scrap a 5% import duty on cement and steel, which industry players are keen to take advantage of.

"Now that cement can be imported duty-free, we're looking to import cement from foreign companies," added Kamal. "And it will have a good impact on the steel traders because it will shave that amount off their costs. But because most of the steel to Dubai is imported we have no choice but to play to the demands of international rates.

On the steel front, a trader on the Dubai Gold and Commodities Exchange (DGCX), Pankaj Gupta, regional manager of brokerage firm, SMC Comex, said that he didn't think that steel suppliers were completely out of stock.

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