By Satish Kanady
DOHA: To ramp up its production capacity, Qatar National Cement Company (QNCC) will sign a contract with global company FLSmidth to launch its new plant-Plant 5. The QNCC signed the Letter of Intent (LoI) with FLSmidth on Thursday. The contract is expected to be signed next month.
QNCC expects it will have to invest QR1.19bn to complete the facility capable of producing 7,500 tons of clinker per day. The new facility will be operational within 24 months after the signing of the contract.
Salem bin Butti Al Naimi, Chairman, QNCC, said that the decision to launch the new plant is part of the company’s strategy to meet Qatar’s burgeoning demand for the next 10 years. The new plant will be launched in parallel to QNCC’s existing 2, 3, and 4 Plants in Umm Bab.
With the launch of the new plant, QNCC’s total production capacity will jump to 18,500 tonne clinker per day. Cement grinding capacity is expected to reach about 22,000 tonnes per day.
Headquartered in Copenhagen, FLSmidth is a leading engineering company listed on Nasdaq OMX Exchange Copenhagen. The company, in a filing to the Danish Financial Supervisory Authority, confirmed the signing of Letter of Intent with QNCC to construct the facility.
“If and when the contract is finalised and becomes binding, we shall immediately inform the market”, it said. FLSmidth added that it is continuously negotiating many potential contracts on the global market.
Cement demand to rise
According to market analysts strong infrastructure spending by Qatar government will continue to boost demand for the cement sector. Qatar’s total expenditure during 2013-14 has been set at $57.8bn, up 18 percent from $49bn set for the previous year. The recent BMI estimates that Qatar is expected to spend $140-150bn on infrastructure over the next decade.
With such a huge number of projects in the pipeline, demand for cement is expected to shoot up. Average cement demand in Qatar during 2013-15 is expected to stand at around 5.5mtpa, higher than the government estimate of 2.5-4mtpa.
With many big projects coming online thereafter, cement demand is expected to pick up further to 10.0mtpa, analysts noted.
Global Investment House (GIH) in its recent analysis on Qatar’s cement sector said that Qatar could face serious cement shortage scenario in near future. Given the rapid rise in cement demand, Qatari companies need to gear up its capacity, GIH analyst Faisal Hasan noted.
Cement price in Qatar have remained mostly constant since last couple of years. In 1Q13, average cement prices in Qatar remained around same at $70.1/ton which was equal to the average in 2012 and 2011.
The same has prices have prevailed since last couple of years because of government control. Due to increase in demand, price may move upward in near term. However, Qatari companies have witnessed an improvement in their margins, said GIH’s October report.
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