Relevance of Pricing Floor for Gypsum-A Case Study of Oman

As in the case of any other mineral, the prices of gypsum also are prone to fluctuations in the short as well as long run. These fluctuations, if long drawn, can severely affect the operating margins of the raw gypsum exporting firms.

The Government of Oman introduced wef January 2017, a price floor of US$ 12.50 per ton of raw gypsum exported out of the country. By analyzing the reasons for the downward slide in the pricing of gypsum in Oman for the period 2010 to 2016 and with the help of break even analysis, this paper tries to find the relevance of the pricing floor introduced by the government to the local raw gypsum industry.

It is observed from the study that the price of raw gypsum exported out of Oman has been coming down over the years. The rise in production of raw gypsum in Oman, the increase of the number of mining companies in the trade and rise in the export of gypsum from The Islamic Republic of Iran have contributed to this fall in the prices. It is also observed that, with the introduction of price floor in Oman, the local exporters of raw gypsum would be in a position to achieve operating profits, which was becoming increasingly difficult with the falling prices.

The study will be useful to the gypsum mining companies in Oman to clearly appreciate the reasons for the downward slide of gypsum prices. Public Authority for Mining in Oman may refer to this in framing rules and regulations. The paper would give an overview to the financial institutions who support the gypsum industry in short/long term funding. Government Agencies like the Ministry of Finance may look at this in formulating the future course of action regarding the commerce and industry in Oman.