Mega-projects to fuel domestic cement demand in 2009
By Conrad Prabhu
MUSCAT — Domestic cement demand is expected to remain robust during 2009, fuelled in large part by planned investments in major infrastructure projects, integrated tourism and residential complexes, and general housing growth, according to a top official of Oman Cement Company. Jamal Shamis al Hooti, CEO of the joint stock company, said cement consumption trends would continue to be sustained by the large government outlays towards a raft of mega-projects planned for implementation during the year.

Al Hooti’s positive assessments came during a presentation on the company’s performance at the Muscat Securities Market (MSM) yesterday. Present at the event were representatives of a number of brokerage and investment firms. The official ticked off a long list of major projects that would contribute to cement uptake during the year.

The project line-up included the six domestic airports at Sohar, Ras al Hadd, Duqm, Shaleem, Adam and Haima; port developments at Sohar and Duqm; the tourism and residential developments in Ras al Hadd, Sifah, Yiti and Taqah; and the Batinah coastal road rehabilitation programme.

In fact, up to 10 per cent of the estimated RO 800 million in allocations towards infrastructure projects, announced by the government in its 2009 budget, would go towards cement purchases alone, said Al Hooti. The private sector is expected to match this figure with investments of their own in cement-intensive ventures, thereby ensuring an even healthier demand for the commodity during the year, he added.

Significant cement demand will also be generated when many Omanis, keen to have their own homes, embark on the development of their government-allotted residential plots. Around 196,000 plots were distributed during the 2003-2007 period, against which only around 37,000 building permits have been issued so far. This leaves some 160,000 plots awaiting potential development, not counting the scores of allotments that authorities have began to make to a broader segment of Omani women, the official explained.

In his presentation, Al Hooti also provided an update on Oman Cement’s ongoing expansion programme. A new production line currently under execution will raise clinker capacity from 4,000 tonnes per day (TPD) to 8,000 TPD. The new plant, being built by China National Building Materials Equipment Corporation (CNBMEC) at a cost of $162 million, will be operational in the first quarter of 2010, he said.

Significantly, the expansion is expected to eventually lead to the elimination of clinker imports by Oman Cement, which imported nearly 922,000 tonnes of this intermediate commodity in 2008. In contrast, clinker imports by the company are projected at around 500,000 tonnes this year. Cement imports, on the other hand, which totalled around 265,000 tonnes last year, will be nil this year, he added. Also under way is a project to upgrade the company’s packing plant, which will impact favourably on its sales of bagged cement.

The upgrade is due to be completed by April this year. Another project to expand the grinding capacity of the company’s cement mills by 3,000 metric tonnes per day, was completed last year, the CEO said. Meanwhile, cement sales by Oman Cement peaked at 2.120 million tonnes last year, as against sales of 1.878 million tonnes in 2007, according to Deepak Dikshit, CFO.

The record sales generated a turnover of RO 63.521 million in 2008, compared to RO 49.911 million in 2007. The company has projected a sales target of 2.1 million tonnes for 2009, which should yield RO 67.528 million in earnings based on the existing price of RO 30 per tonne of cement, he said.

Company officials said they foresaw no prospects of a decline in cement prices in the Sultanate despite reports of a slump in the real estate sector — the main driver of cement demand — in the wider region. On the contrary, Oman Cement has seen cement demand soar to around 9,000 TPD at present, from 7,000 TPD a year ago, the CEO stressed. Total domestic demand for cement was estimated at 4.5 million tonnes in 2008, with Oman Cement and Raysut Cement — the country’s two main producers — accounting for around 3.5 million tonnes of this volume. The remainder was met through imports.