Tuesday, November 3, 2009

Critical Sand Shortage in the Gulf

It may sound strange: a GCC state that needs to import sand.   A bit like carrying coals to Newcastle.

But that's the case with Bahrain.  Without imports of sand and gravel, its construction and real estate sectors would be seriously hurt. Costs would escalate.

What's perhaps even more strange:  a GCC country banning the export of sand and gravel because of concerns over a potential shortage.

Earlier this month Saudi Arabia announced that at the end of November it would cease exports of all sand and gravel.  It appears the Rub Al-Khali (Empty Quarter) may indeed be empty.

Two remarkable events.  And two contradictory accounts.

The first in English from Bahrain's Gulf Daily News is the more upbeat of the two.  From this the problem is manageable, though if it so modest, it's not clear why government support is needed.

From across the King Fahd causeway on which the sand comes (at least until the end of November), a much different story in Arabic from AlWatan.    Prices of sand up 30% since the announcement of the impending ban as Saudi and Bahraini merchants prudently hoard stockpiles in anticipation of further price increases in December.  As well, an account of a dramatic price increase from BD1.5 per m3 to BD4.5 over some unspecified time.  And a picture of "sand pirates" busy scooping up the precious commodity near Dammam.

There was a similar sand crisis in 2003 - also triggered by a Saudi ban.  Subsequent consultations between the two governments led to the apparent discovery of additional Saudi sand.

One hopes that similar exploration will be successful this year,  not only for the industry but also for the banks that finance it.

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