Massive construction spending to support Qatar cement demand

17/05/2012 07:36 AST

Massive investment in Qatar’s construction sector on the back of “strong economic fundamentals” will trigger demand for cement, a new report has said.

Cement consumption in Qatar, according to Commercialbank Capital, will grow at a compound annual growth rate (CAGR) of 12% up to 2015.

Qatar’s current production capacity stands at 6.2mn tonnes per year (tpy), Commercialbank Capital said in its first report on Qatar’s construction sector.

The existing demand can be met by the current production. However, Commercialbank Capital expects consumption will be “at the peak” in 2013 and 2014 as majority of the projects that are planned or under construction will be completed by 2015.

Qatari companies are “unlikely to match this demand”, which means excess requirement for cement will have to be met through imports from Saudi Arabia and the UAE.

Cement producers in Qatar are planning to further expand their capacity in preparation for the “massive investment” in the country’s construction sector. Majority of construction activities will be in relation to infrastructure upgrade and real estate developments, the report said. Qatar National Cement Company (QNCC) is the country’s largest cement producer with a production capacity of 4.4mn tpy and a market share of around 70%, the report said. QNCC has announced that it is going to increase its cement capacity by 0.93mn tpy to 5.36mn tpy in the coming years.

Two other companies – Al Khalij and Al Jaber - also contribute to local cement production. “Cement price in Qatar has been stable as it is controlled by the government,” the report said. On the other hand, prices have been volatile in the GCC (Gulf Cooperation Council) region, especially in the UAE.

“Going forward, we do not expect any volatility in the cement price and believe that it will continue to remain stable at current levels,” Commercialbank Capital said.

Qatar is the third largest cement market in the GCC in terms of both consumption and production capacity. Historically, cement production in Qatar was below the consumption and the excess demand was met by imports from Saudi Arabia.

At the regional level, Commercialbank Capital said the industry underwent “significant expansion,” driven by massive investments in the construction sector. The cement production sector has been the “biggest beneficiary” of the high level of construction spending across the GCC region.

The region’s cement production stood at 85mn tpy in 2010 compared with 48mn tpy in 2005, Commercialbank Capital said.

With demand increasing, the region has seen many new players entering the cement production industry.

In Qatar, a new cement producer Al Khalij has entered the fray, which for long was fed by QNCC and Al Jaber Cement Industries .

Gulf Times