Iraqis Deal with Cement Shortage, High Prices in Rebuilding
11 January 2006
Iraq has been hit with a construction boom - in no small part due to the infusion of more than $20 billion in reconstruction money. The reconstruction has fueled a demand for many building materials and at the top of the list is cement. In addition to electricity shortages and the lack of clean water, the country is now experiencing a shortage of the product.
This construction site sits in the middle of a large traffic circle in south Baghdad. It is surrounded by cars backed up bumper to bumper in all directions. The construction project aims to reduce the traffic, by building a raised highway across this part of town.
About 20 men, some in red and white checkered headscarves, smooth concrete with flat ended shovels as the gray sludge is shot from a large hose onto neatly placed steel bars. With projects like these occurring all over Iraq for the first time in 30 years, site manager Ashraf Mahmood says prices have skyrocketed.
"The prices for cement and sand and aggregate, expand too much, as you know the gas problem, the transportation problem, in addition the Iraqi factories stop for working," he said.
Mahmood says the company doing this project has built its own temporary concrete mixing plant on site, because buying concrete from a cement plant is too expensive.
Another engineer, Mohammed Salih, says there is a very simple reason for the shortage.
"Anything you do, you must have cement," he said. "Any project, if you need tiles, bricks, even a small house, and even a big project."
Salih says the price for one ton of cement has gone up three to five times since before the war - from about $20 then to $125 now.
The problem is supply. June Reed, the U.S. Embassy Private Sector Development advisor in Baghdad, says most of Iraq's 13 plants are operating at about 25 percent capacity, or not operating at all.
"The state-owned enterprises that relate to cement are very old, some have plants and equipment that is 30-years old, outdated, generally not profitable, certainly not efficient," she said.
Iraq's chronic electricity and fuel shortages, in part caused by sabotage and insurgent attacks, have also shut down plants.
Salah Kambour at the Iraqi Ministry of Industry and Minerals says Iraq is rich in limestone and clay. Those two ingredients create the cement that, when mixed with sand and gravel, makes concrete. He says Iraq used to export its cement, but now: "We are importing cement from everywhere: from Turkey, from Lebanon, from Egypt, also from Kuwait, and from China! So from everywhere cement is coming!" he said.
Kambour says the production of Iraq's cement plants is about half the current demand. But even if the plants are repaired and provided with new equipment, they could only potentially produce about about half of the country's projected demand.
The American Embassy in Baghdad's commerce counselor, Andrew Wylegala, says privatization can help bridge this production gap and that across the board free-market reforms promise the best future for Iraq's other state-owned industries.
"Clearly the private sector is the way forward, the work that has been done through official funds and through reconstruction efforts, was always intended and has made good headway in setting the stage so private sectors players could come in and continue the job," he said.
In a move toward that goal, the Ministry of Industry announced that two cement plants will be the first state-owned companies to be partially purchased by privately owned companies. Kambour hopes it pays off.
"We hope they can get the know-how, to reach the design capacities, so the bad need of cement can be satisfied," he said.
More investors have found Iraq's construction boom a good bet and 20 new privately owned cement plants are to be built at a cost of $3 billion during the next three years. Until then, Iraqi small businessman and contractors struggle to continue rebuilding a country where concrete prices are prohibitively expensive.
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