Surplus cement capacity together amid slow construction demand in the UAE will amazingly increase cement export from Pakistan to the region. Sounds strange, but the decision by UAE Cement Manufactures Association to increase the price of regionally manufactured cement will make cement exports from Pakistan far more competitive in their market.
This decision was taken to protect UAEs cement industry, which is facing high production costs. Cement prices in the region have also fallen drastically, from Dh300/ton during the construction boom era to Dh225/ton as of today.
In Abu Dhabi, which is less affected by the slowdown in the construction sector due to its strong financial health, cement will be priced at Dh250/ton, while in areas where the slowdown penetrated much deeply, such as Dubai and Northern Emirates - cement bags will be sold at Dh10/ton and Dh30/ton discount to Abu Dhabis price. In dollar terms, this means that cement will be sold at $68/ton in Abu Dhabi and $65/ton in Dubai.
On the other hand, exporters from Pakistan are selling their produce at FOB price of $50/ ton in international market. In addition, $6/ton freight charges are incurred to transport cement to the UAE.
Adding the miscellaneous costs such as terminal charges etc, the final price of cement will be close to $60 /ton, upon landing in the UAE, or about 12 percent cheaper than the retail price of the regions own players.
Although, cement exports from Pakistan to the UAE remained negligible in 2009, due to weak demand, the region still remains an attractive export destination due to geographical proximity. Cement exports to the region accounted for 18 percent of the total cement exports in FY08.
Despite the planned capacity expansion in the region, Pakistani exporters hold optimistic views. According to industry sources, exports will increase on the back of rising demand from other South Asian and Middle Eastern countries that are not self sufficient - such as Sri Lanka, Bangladesh, Qatar, Kuwait and Iraq, whereas high demand from Africa is also seen absorbing large quantities of cement supplies.
But whether Pakistani manufacturers can beat their Indian and Chinese counterparts in international market still remains to be seen.
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