Rising energy costs across the region are already affecting local manufacturers and could lead to more inflation in the building sector.
Bob Flanagan, the UAE managing director of project management and cost consultancy services at Colliers, has said that rising energy prices are feeding into increased input costs for a variety of manufacturers of building products, including cement suppliers, glass manufacturers, cladding suppliers, PVC cabling firms and even timber and joinery workshops.
“Basically, any construction material that is manufactured within the UAE will be affected by this,” he said.
The increase in energy prices was cited by building materials company Arkan as the reason for its decision to close its 43- year-old Emirates Cement Factory in Al Ain yesterday.
The company announced a restatement of its preliminary accounts for 2016 as a result of the closure. It said that a previously announced Dh75.7 million net profit declared in its unaudited results last month will now be reversed into a Dh82m loss due wholly to the fact that it has written off the value of the plant from its balance sheet.
Arkan has shifted production from Emirates Cement Factory to its nearby Al Ain Cement Factory – a Dh1.3 billion facility that opened in November 2014. The move will lead to an annual cost saving of Dh45m, it said. The Al Ain Cement Factory is now running at almost full capacity.
“This one-off book loss doesn’t change the fundamentals of Arkan business and we are actively exploring ways to dispose of the plant in the near future and realise the highest value possible,” said Jamal Al Dhaheri, the chairman of Arkan.
Cement production, which is an energy-intensive process, accounted for 72 per cent of Arkan’s sales in the first nine months of last year. In December, the company said it was facing a 73.3 per cent rise in the price of gas used to fire its kilns. Its total power bill was set to increase by just over 56 per cent, the company said.
Yet despite higher input costs, Mr Al Dhaheri said that the company is “looking forward to maintaining our leadership position in 2017 by being the lowest cost producer in the segment”.
He said that Arkan’s cement operation generated an operating profit of Dh133m last year off sales of Dh613m, despite the Al Ain plant being closed for four months last year after it was damaged by a storm.
A report published by Colliers in January stated that cement costs increased by 3 per cent year-on-year to the end of September 2016 and the cost of concrete blocks climbed by 6 per cent. Other locally produced materials such as aggregates and sanitary ware also subject to price hikes.
Inflation in building materials prices has largely been kept in check for the past two years, helped in some instances by a weaker commodities market that has led to prices of imported materials such as steel and copper to drop sharply.
And although the slow market for contracting in Abu Dhabi means that local construction firms many not be able to increase their own margins, they are likely to have to factor in rising costs, according to Mr Flanagan – not least with the onset of VAT from next year.
“On top of that, in some of the markets around the world prices are increasing. For example, material prices are increasing significantly in America and any of those goods that are imported to here will have an effect.
“There will be an inflationary factor going into 2018. These are low single-figure inflation prices – you’re not talking about a 9 per cent increase. For the short term, there is nothing out there that will affect the UAE market in an extreme way.”
mfahy@thenational.ae
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UAE currency: the story behind the money in your pockets
Global Fungi Facts
• Scientists estimate there could be as many as 3 million fungal species globally
• Only about 160,000 have been officially described leaving around 90% undiscovered
• Fungi account for roughly 90% of Earth's unknown biodiversity
• Forest fungi help tackle climate change, absorbing up to 36% of global fossil fuel emissions annually and storing around 5 billion tonnes of carbon in the planet's topsoil
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Other simple ideas for sushi rice dishes
Cheat’s nigiri
This is easier to make than sushi rolls. With damp hands, form the cooled rice into small tablet shapes. Place slices of fresh, raw salmon, mackerel or trout (or smoked salmon) lightly touched with wasabi, then press, wasabi side-down, onto the rice. Serve with soy sauce and pickled ginger.
Easy omurice
This fusion dish combines Asian fried rice with a western omelette. To make, fry cooked and cooled sushi rice with chopped vegetables such as carrot and onion and lashings of sweet-tangy ketchup, then wrap in a soft egg omelette.
Deconstructed sushi salad platter
This makes a great, fuss-free sharing meal. Arrange sushi rice on a platter or board, then fill the space with all your favourite sushi ingredients (edamame beans, cooked prawns or tuna, tempura veggies, pickled ginger and chilli tofu), with a dressing or dipping sauce on the side.
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
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1. Fasting
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COMPANY%20PROFILE
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Global state-owned investor ranking by size
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Japan
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Norway
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Canada
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MATCH INFO
Real Madrid 2 (Benzema 13', Kroos 28')
Barcelona 1 (Mingueza 60')
Red card: Casemiro (Real Madrid)
About RuPay
A homegrown card payment scheme launched by the National Payments Corporation of India and backed by the Reserve Bank of India, the country’s central bank
RuPay process payments between banks and merchants for purchases made with credit or debit cards
It has grown rapidly in India and competes with global payment network firms like MasterCard and Visa.
In India, it can be used at ATMs, for online payments and variations of the card can be used to pay for bus, metro charges, road toll payments
The name blends two words rupee and payment
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1. Featherweight 66kg
Ben Lucas (AUS) v Ibrahim Kendil (EGY)
2. Lightweight 70kg
Mohammed Kareem Aljnan (SYR) v Alphonse Besala (CMR)
3. Welterweight 77kg
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The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
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