Oman Cement Company (OCC) announced that it is planning to set up a new cement plant in Duqm, the Greenfield economic zone. The plant will have a capacity of producing 5,000TPD of clinker (equates to 1.7mtpa of cement capacity) and envisages an investment of about USD212mn. Please note that this new plant is entirely different one from the earlier plan of setting up new plant (Al Wusta Cement) in JV with Raysut Cement.
 
How about the JV plan with Raysut? The plan to set up the new cement plant in Duqm was initially started in 2009, but the company has in 2011 put the plan on hold, citing shortage of natural gas as the reason. In Aug 2016, Oman Cement Company (OCC) registered a new joint venture (Al Wusta Cement Company) with Raysut Cement Company (RCC) to establish a new cement plant in Duqm. As per the latest announcement from both companies, the plan was under various stages of feasibility studies and no decisions have been taken so far regarding whether or not to establish the new plant.
 
What are the current cement sector dynamics of Oman? Currently, Oman has enough cement supply to meet its demand of c8.0mtpa. However, the significant amount of cement imported from the UAE (c3-4mtpa, equivalent to c40% of its annual demand) continues to weigh down on cement prices. Moreover, a new cement grinding mill (1mtpa capacity, as per our understanding) has started in the port city of Sohar, which further enhanced the competition scenario. 
 
Our view: The news to set up a new fully owned cement plant by OCC was a bit of a surprise, as the company was in talks with Raysut for over a decade. However, we believe OCC decided to speed up the process and establish the plant on its own because of the delays it had experienced with the partners in its earlier plans. The company did not announce the proposed capital structure as of yet; we assume it will be composed of both debt and equity, and it would take at least two years to complete the project, in our view. Although we do not see any significant positive impact on OCC over the medium term, as the medium-term competition scenario would remain stable, the new plant would mostly meet future demand expectations in the Duqm region and cater to export markets, as the proposed plant site is close to the Duqm Port. 

Sameer Kattiparambil
 
Oman Cement Co.: OMR0.32 as of 6 Dec. 2018, Rating: Neutral, TP: OMR0.46/share, MCap: USD280mn, OCOI OM/OCOI.OM