Qatar cement demand to double in 3 years: Arqaam

18/04/2014 06:30 AST

Cement demand in Qatar is expected to double in the next three years in view of the $70bn worth projects under execution now, Arqaam Capital said in a report.

Demand is estimated to be at around 6.1mn tonnes per year now, the report said.

Domestic construction expenditure, which equated to 6.5% of GDP in 2013, has been estimated to touch 6.9% of real GDP in 2014, according to the Ministry of Development Planning and Statistics.

The Qatari government recently released figures behind its budget for fiscal 2014-2015, stating QR225.7bn in planned spending (up 3.5% year-on-year), of which about 40% will be allocated to public projects. As per Qatar Central Bank governor's statement in March, Qatar is expected to pen up to about $50bn (QR182bn) in construction projects this year (up 15% on 2013).

The move follows the Qatar's plan to invest $208bn (QR757bn) on infrastructure developments in 2013-2018, largely linked to the 2022 World Cup, Arqaam said.

Given that current projects under execution are worth $70bn, and reflect an average churn rate of 3-4 years, the expenditure implies a doubling in cement demand within the next three years, it said.

Accordingly, and factoring in execution delays, Arqaam expect cement demand growth to accelerate, delivering 9.4mn tonnes per year in consumption by 2017.

"We expect production capacity (while accounting for capacity increases in fiscal 2016) and demand levels to reach equilibrium by 2018. Our forecasts are on the conservative side as Qatar's Ministry of development and planning's most recently published survey suggests demand for limestone is set to increase by an estimated 131% in 2014 and 127% in 2015, with demand for washed sand growing by an estimated 108% in 2014 and 106% in 2015," the report said. "We believe that new supply from capacity additions in the sector will be readily absorbed."

Qatar National Cement Company is the market leader in cement production in the country with a nearly 65% share of the domestic market for ordinary Portland cement (OPC) and sulphate resisting cement.

QNCD currently operates four plants at an aggregate clinker capacity of nearly 3.6mn tonnes per year and cement capacity of nearly 4.4mn tonnes per year. All output is sold locally and plants operate at relatively high utilisation rates, Arqaam Capital said.

Gulf Times