Construction sector in the UAE witnessed a massive drop in costs during the past 12 months. Prices of most materials dropped by more than half compared to 2008.
Producers and distributors said that they experienced a difficult year as reduced cost coupled with falling demand led to severe drop in revenues. Most affected were ready mix companies. Many of them had to cut their production by more than 50% and send several staff on leave in order to reduce operational cost.
The UAE market experienced oversupply of cement and producers had to cut production, in an effort to bring down the excess cement in the market. By the last quarter of 2009 imports had drastically reduced. Steel used in the construction sector also faced a similar fate. The beginning of the year witnessed a severe oversupply in the market, bringing the prices down by half.
Although the excess cement in the market had significantly reduced by the end of the Q2, imports failed to pick up as demand continued to remain weak. Meanwhile, local producers said that they had not reduced production as locally manufactured steel was sufficient to satisfy the domestic demand. Producers, however, said that they had to severely reduce their profit margins in order to discourage further imports.
Prices during the H1 of 2009 had been fluctuating. The year started with rebar prices at USD 485 in January from USD 460 in December, increasing to USD 510 in February before falling to the lowest price of USD 420 in March. Rebar prices again moved up in April to USD 455 and increasing further to USD 495 in May and falling again to USD 455 in June.
By the Q3 rebar prices have shot past USD 500 per tonne for the first time since February this year and had reached the highest since November 2008. Industry analysts however felt the increase could be temporary as there has not been enough evidence of real growing demand.