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Given the low oil price the economies of the Gulf Cooperation Countries (GCC) (including the UAE) have taken a knock in recent years. So, the news this week that Arkan has closed its Emirates Cement plant in Al Ain for good may not be too surprising. The building materials producer opened its whopping 5.7Mt/yr Al Ain Cement plant in late 2014 and, now that rising energy costs have become too much of a burden it appears to have shut down the older plant for good and moved the production across. Now it says the new unit is operating at nearly full capacity.
Arkan’s cement business saw its revenue fall by 9% year-on-year to US$220m in 2016 from US$239m in 2015. Net profit fell more sharply, by 25% to US$20.6m. The chairman cited a ‘harsh current market cycle’ as the cause of his company’s woes and also blamed a heavy rainstorm in March 2016. The storm caused an interruption in production due to a damaged conveyor belt at its Al Ain Cement plant that stalled the production on half of its raw material handling line. The producer turbocharged its sales and profits in 2014 with the opening of the new plant and managing to continue the growth in 2015 but it slowed down in 2016. Arkan has also been in the alternative fuels news this week with the announcement of plans to test burning spent pot lining. This certainly hints at a producer trying to minimise its fuel spend.
Other local producers have had similar experiences. Fujairah Cement reported that its revenue fell by 2.5% to US$162m from US$167m although it did manage to grow its profit by 12% to US$15.4m. Earlier in the year it attributed the rise in profits to higher prices and cost control on the production side. The producer, a subsidiary of India’s JK Cement, operates a dual Ordinary Portland Cement and White Cement plant. Union Cement’s revenue fell by 10% to US$153m from US$170m and its profit fell by 19% to US$22.9m from US$28.2m.
A report by Deloitte on the construction market in Dubai published in early 2016 showed that the UAE became a net exporter of cement in 2010. Local producers exported 3Mt of cement in 2012 and this was aided by high energy cost subsidies. Prior to this the nation had been importing large amounts of cement and building up its local production capacity to meet its voracious real estate market. However, this previously caused problems in 2007 when the real estate market crashed. More recently the Dubai Chamber reported that the potential value of construction projects awarded in 2016 was US$36.5bn. Overall in the GCC the value of contracts fell by 17% year-on-year. Locally, the Dubai construction sector’s real added value, or its contribution to the national gross domestic product, fell in 2012 before rising slowly subsequently but its growth rate picked up in 2013 and then started to slow down.
Looking at the broader economy the World Bank reckoned in the autumn of 2016 that growth in the UAE was predicted to continue slowing in 2016 before picking up in 2018 due to rising oil prices. In the midst of uncertain times a report by the Dubai Chamber called for cement producers to improve their competitiveness, save on production costs, use more alternative fuels and push exports. To this end Arkan’s trial with spent pot lining and today’s news of a technology start-up promoting a fly ash and slag cement for 3D printing suggest a cement and construction industry marking time before growth returns.
Written by Global Cement staff
21 March 2017
India: Redecam Group and Isgec Heavy Engineering have started a joint venture called Isgec Redecam Enviro Solutions in Noida, Delhi. The new company will provide for flue gas treatment systems for the cement, power and metals industries.
“Air pollution is one of the major environmental issues India and the rest of Asia face today and it is a serious problem with the major sources being industrial emission and biomass burning, vehicle emissions and traffic congestion. In the effort to reduce the country’s air pollution, Redecam and Isgec aim to build a strong business in Asia, drawing upon Redecam’s global expertise combined with the skills and knowledge of Isgec, a strong partner headquartered in India,” said Barry Downing, chief executive officer of Redecam Group.
Italy’s Redecam Group is an engineering company that serves the air pollution control industry around the world. India’s Isgec Heavy Engineering is a general engineering company with references in the cement, chemical, textile, power, oil, gas and sugar industries.
China: Four workers have died when the roof of a shed collapsed at the Zhongda cement plant in Zhangzhou, Fujian Province. Three workers died at the scene and another died in hospital, according to the Xinhua News Agency. An investigation is currently underway.
Written by Global Cement staff
21 March 2017
Ethiopia: Regional officials are demanding that foreign cement producers, including Dangote Cement and Derba Midroc Cement (DMC), should let cooperatives of unemployed young adults run part of their mining businesses. A draft contract drawn up by Oromia state’s East Shewa Zone administration wants the young adults to operate pumice mines for the cement producers, according to Bloomberg. The initiative follows attempts by the national government to alleviate social pressures, following violent protests in the state in late 2016 in response to over alleged land dispossession, political marginalisation and state repression. The local administration reportedly stopped production at the Dangote and DMC plants in early March 2017 while it discussed its proposals with the producers, according to local press.
UAE: Arkan has closed its Emirates Cement plant in Al Ain blaming increasing gas and electricity costs. The building materials company temporarily closed the plant in late 2016 but this has now become permanent, according to the National newspaper. Production will move to its newer Al Ain Cement plant that is now running at almost full production capacity. The decision to close the older plant is expected save the company US$12m/yr. The Emirates Cement plant was one of the oldest cement plants in the country with operation since the 1970s.