Raysut Cement Company (RCC) announced this week that it is preparing to commission its Duqm grinding plant in late 2021. It follows the news from earlier in September 2021 than Oman Cement Company (OCC) is planning to build a new clinker production line at its Rusayl cement plant.
First some detail on the RCC project. The new US$30m unit will have a production capacity of 1Mt/yr, bringing the company’s total cement production capacity to 7.4Mt/yr. As part of the development process, RCC signed a land lease and Port of Terminal services agreement with the Port of Duqm Company. The new grinding unit is also intended to complement RCC’s expansion and new investments and acquisitions in Oman, Asia and East Africa.
Other relatively recent RCC news include, in 2019, its acquisition of Sohar Cement Company in Oman for US$60m, the announcement of plans to build a new 1.2Mt/yr integrated plant in Georgia for US$200 and a joint-venture deal to establish a 1Mt/yr grinding plant in Somaliland for US$40m. Then in 2020 it obtained a 75% stake in a cement terminal in the Maldives owned by subsidiaries of Holcim, and a project to build a 0.75Mt/yr grinding plant in Toamasina, Madagascar, for US$30m was detailed in the local press. More recently in 2021, China-based Sinoma started building a waste heat recovery (WHR) unit at RCC’s Salalah cement plant, RCC gained certification for some of its cement products for export to the European Union, and the Competition Authority of Kenya granted RCC permission to sell a majority stake in its East African based business.
OCC’s upgrade to its Rusayl cement plant will see it add a new production line and increase the capacity of one of the existing lines. Overall the project will increase the unit’s nominal clinker production capacity to 15,000t/day from 8700t/day at present by adding a new 10,000t/day line and increasing the current Line 3 to 4000t/day from 2700t/day at present. Lines 1 and 2, at 2000t/day and 2700t/day, will then be decommissioned after the new line starts operation. OCC says that the new line, when built, will be the biggest in the country. Scant detail has been released beyond the main vision but the company says it wants to focus on low power consumption, consider using a waste heat recovery unit, increase its fuel efficiency, use alternative fuels and adhere to ‘best’ environmental standards. It has hired PEG Resources, a Switzerland-based engineering consultancy, to conduct a technical study, tendering and contracting as well as supervision of the project execution. The company had also been working towards building a new integrated plant at Duqm. However, this project was put on hold in the first quarter of 2021 pending confirmation of fuel availability and as the Rusayl upgrade took priority.
The Omani cement sector is dominated by OCC and RCC since they own the biggest plants and they have consolidated this by buying competitors and building new plants. Both companies suffered from reduced sales year-on-year in 2019 due to imports from the neighbouring UAE. The government duly implemented anti-dumping measures in 2020 and company revenues recovered that year. However, the coronavirus pandemic then hit, leading to losses at RCC in 2020 although the situation appears to have improved for the company in the first half of 2021. OCC reported continued ‘intense’ price competition between local producers and importers in the same period.
OCC is majority owned by the government via an investment fund. As the recent announcement shows, it has decided to focus on building production capacity domestically. This week’s launch of its Al Burj Cement as a distinctive local product looks like another part of this approach. However, as Bloomberg reported in May 2021, the government was considering selling its stake in the producer and had been in discussions with financial advisors on the matter. By contrast, RCC’s biggest shareholder at the end of 2020 was the Abu Dhabi Fund for Development, with a 15% share. RCC has taken a more international approach, operating an integrated plant in the UAE and focusing on trading and grinding cement around the Arabian and African parts of the Indian Ocean.
Similar to other Gulf States, the building materials markets in Oman are dominated by government spending and the price of oil. Market forecasts predict recovery in the building materials markets in 2021 but in the longer term growth depends on general economic diversification. Oman, like its neighbours, is trying to do this. In this context it is instructive to see that OCC and RCC are pursuing different business strategies.