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Three years ago, a company in Qatar built a cement factory on a ship to ensure that it can get the cement around the Gulf wherever there is a supply shortage.
ISQAT, a joint venture project between local investors and Seament International, was said to be a unique solution for Qatar's cement crisis.
Fast forward to the current year - 50 fully-laden cement trucks were turned back by Saudi authorities at the King Fahad Causeway last week. They were stopped as Saudi Arabia stuck to the weekly 25,000-tonne cement quota for Bahrain, despite hopes it would be eased.
Cement supplies from Saudi Arabia were suspended earlier in June when rule changes had made it mandatory for importers to get complicated approvals from the capital, Riyadh.
Cement supplies were halted for 10 days, costing the Bahraini construction industry an estimated BD4 million a day. Supplies resumed on June 8, but stopped again almost immediately, until limited supplies resumed on June 14.
Contractors say only 60 to 70 per cent of the industry's daily need of 8,000 to 10,000 tonnes was coming in at the moment.
They say the 25,000 tonnes per week was simply not enough to meet the demand for around 40,000 tonnes.
Bahrain's construction industry is reeling under the cement crisis, with supplies too limited to meet demand. Contractors and ready-mix concrete companies have welcomed government moves to import cement and other construction materials from around the world. But they say supply must be "consistent and assured" for the long-term.
At least one ready-mix company has ordered its own shipment from Pakistan, which is expected to arrive shortly.
Contractors and ready-mix companies say cement of a particular quality must be maintained throughout construction projects.
Although international producers have stepped up their presence in the GCC over the past two years, they are still only marginal players, on account of the high cost of entry.
According to a study by Prime Holding, North America and Western Europe remain among the world's largest cement producers but the focus of production is shifting to the Middle East and East Asia due to their aggressive construction activities.
The protracted negative fallout from the credit crunch on the real estate markets of the West could well exacerbate the change in cement market dynamics further over the short to medium term.
Exporters in East Asia, India, Pakistan and Egypt are capitalising on cement shortages across the GCC. East Asia is currently the world's largest producer and consumer, accounting for 58.8 per cent and 56.9 per cent of the global aggregate, respectively.
Iran is widely expected to become a major exporter to the GCC as well as to Afghanistan and Iraq. It enjoys an abundance of both raw materials and energy components required for production, which has allowed the country to maintain prices at $55 per tonne. Iran's cement production capacity is estimated at 45 million tonnes per annum after a wave of new production facilities came on line in the first quarter of this year.
The Turkish cement industry, with a production volume of 52.5 million tonnes per annum, is poised to become one of the 10 largest producers in the world. Additional capacity is expected to add a further 10 million tonnes per annum this year.
Egypt's cement sector has witnessed significant changes over the past two years as an environment of lower prices on the back of cheaper subsidised energy saw the country convert itself into a major cement exporter. The government has issued licences for eight new factories with production capacity of 13.5 million tonnes per annum, bringing Egypt's total capacity to 55 million tonnes per annum by 2010.
Meanwhile, the GCC cement industry is preparing for an unprecedented build-up in production, as a result of $6.7 billion worth of new investment.
Some 29 schemes are planned or under way in the biggest wave of new capacity ever seen in the region.
As a result of the investment programme, capacity would more than double to about 106 million tonnes a year (t/y) in 2010 from 50 million t/y today.
The biggest increases will be witnessed in Saudi Arabia and the UAE, which in three years' time will account for 90 per cent of the GCC market. Even though demand will remain robust, fuelled by a regional projects market worth $1.5 trillion, strong economic growth and growing populations, it will not be sufficient to accommodate all the supply increase.
Saudi Arabian producers look particularly vulnerable to over-capacity with production potentially outstripping demand by 10 million-15 million t/y in 2010.
Analysts say cement prices, which have doubled over the past four years, will peak in 2008 and soften in both 2009 and 2010, as a result of the excess capacity. The biggest falls are expected in Saudi Arabia, where a price war could break out among producers.
The UAE is also expected to see a price softening in 2009, although at about 10 per cent, it will be less than in Saudi Arabia. Import dependency in most other GCC states will see prices remaining relatively stable.
Increasing over-capacity and price softening should see more reasonable valuations of cement companies, which will pave the way for some consolidation in the fragmented industry.
However, given the restrictions on foreign ownership, consolidation is likely to be led by regional rather than international producers. Environmental and feedstock issues will become more pronounced for the GCC cement industry in the years ahead. With tougher environmental legislation likely and a rise in gas prices expected, cement producers are facing higher production costs.
