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Reports & Analysis

Obstacles faced by ready-mix concrete companies – Mar 2022

During the past two years 2020-2021, and in the time of pandemic (Covid 19), ready-mix concrete companies in the UAE faced great difficulties that led to great losses for many of them, which pressured their financial situation to the point where it prompted them to reduce their expenses by ending the services of many employees and closing branches.

Going back to the time of the construction boom since 2003 in Dubai, where the emirate entered a stage of growth and reconstruction unprecedented in its history, the demand for ready-mix concrete increased to a large degree, which prompted many existing concrete companies to expand and increase their production capacity to meet the increasing demand to a degree that led to a major shortage In raw materials such as cement, the price of which increased in that period by more than 100%, and concrete companies benefited by increasing production and prices.

With the onset of the financial crisis in 2008, many projects in Dubai stopped, and demand moved to Abu Dhabi, and the reconstruction process began to a large extent, which prompted concrete producers to expand, as happened in Dubai, and many Dubai companies opened branches in Abu Dhabi, thus increasing their production capacity as well. As soon as working conditions began to improve at the end of 2014, the contracting sector began to recover again in Dubai, and the cycle of demand for concrete increased, which prompted many companies to open their closed branches, and even the number of companies increased more than the first.

And with the beginning of the year 2020, Corona disease appeared and terrified the world, and many businesses stopped suddenly, and most of the projects that had been planned were completed and had not yet started, which caused the world to stagnate and led many companies to reduce their expenses to match the decline in sales, but In the field of concrete, the investment is large in equipment and buildings that cannot be dispensed with, which pushes companies to bear costs and expenses that are difficult to dispense with or stop, and this leads to increased losses with low demand and an abundance of supply.

And with the decrease in the number of projects in the years 2020 and 2021, this leads to the intensification of competition among contractors, which prompted them to accept projects at low prices and large losses in order to continue to be present in the market until conditions improved.

Contractors obtaining projects at cheap prices prompted them to ask suppliers to bear part of their loss by putting pressure on them and buying products at cheap prices that are much lower than the cost, and this is what happened with concrete companies and increased their losses during the years 2020 and 2021.

And with the decline of Corona disease in the world, the world began to recover again, but it was accompanied by another problem, which is inflation and the rise in prices that started from energy, transportation and all the necessities of life that reached even food products.

This increase in the prices of raw materials prompted concrete producers to raise their prices by 15 dirhams as of January 15, 2022, and this is no longer useful to them because it may not be enough to raise the prices of aggregate, diesel and chemical materials.

Realizing the increase in the burden on contracting companies and to improve their conditions and reduce their losses, concrete companies seek to raise their prices for new projects and to a minimum for each product, as well as for pump prices and temperatures.

The Readymix Concrete industry, as a whole, is going through a difficult situation and incurred great loss in the year 2020 and 2021 due to pandemic (Covid 19).   As the COVID-19 outbreak has slowed construction in U.A.E thus low production, it leads to low selling price with high competition among Readymix Concrete suppliers. Lots of Governmental projects, which were budgeted during the year 2020-2021, has been kept in abeyance as the priority for the government was to fight the pandemic and make sure the normal life of citizens.