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Material supply

by Duncan Hare on Jan 14, 2012

Will steel supply keep pace with demand in the region?
Will steel supply keep pace with demand in the region?

The building materials market is valued at $145bn. Duncan Hare speaks to Frost & Sullivan about the impact of the building boom in Qatar and Saudi Arabia

Driven by the ambition of hedging from an oil-and-gas-based economy towards transforming into a hub for tourism and finance, the GCC region is projected to spend $452bn on infrastructure projects. In a typical construction project, the building material cost component is estimated at 33% of the total cost of the project.

Building materials used in the construction industry range from structural steel to cement and its by-products, wood (plywood, boards, timber, veneer, laminates), cladding, kitchen systems, sanitaryware and systems, glazing systems, MEP hardware (such as lighting, HVAC, fire and safety systems), door systems to flooring and ceiling systems and paints.

“Based on current and ongoing projects, the conservative market estimate for building construction materials is pegged at $145bn,” says Kumar Ramesh, Frost & Sullivan industry manager, environmental and building technologies practice, MENA and South Asia.

“At an aggregate level, the growing infrastructure investment is expected to drive the demand and growth of the building construction material industries in the GCC region.

To illustrate, if the investment in infrastructure projects is growing at a rate of 10% a year, the demand for building construction materials and growth of the related industries would always be on a positive trajectory at a 1.5X to 3X magnitude.

Also, the kind of project determines the demand for the material types,” says Ramesh. The burning question, of course, is will supply be able to keep up with demand. “Supply can be kept up under two circumstances, namely if normal economic conditions prevail, and if the raw materials supply and prices are favourable to the building materials industry.”

According to Frost & Sullivan, both Qatar and the Kingdom of Saudi Arabia have increased their manufacturing activity as a result of increased demand, a trend especially well directed towards building materials in order to help the domestic construction industry in achieving a level of self-sufficiency.

Ramesh says that what needs to be taken into consideration in terms of any future projections is that both countries have ramped up construction activities due to the growth in economic cities and the run-up towards the FIFA World Cup in 2022. “Qatar and the KSA markets are expected to consume close to 50% of the building materials supplied in the GCC region,” says Ramesh.

This has definite implications in terms of both logistics and the phasing of projects going forward. Ramesh defines the availability of financial investment, skilled labour for construction, building construction materials, construction equipment, technological and managerial workforce as the sequential key factors (SKFs) determining the phased execution of future projects.