Valued at about US $5 to $6 trillion (AED 20-22 trillion) worldwide, the cable industry is pegged at around US $200 million in the Middle East, with 30% of that figure coming from just the UAE market.
And the market is expected to grow at a rate of 5% annually, with a minor correction in that figure if the economies in the Middle East register a slowdown next year.
Andrew Shaw, managing director of Ducab, says that he has not noticed any impact of the worldwide financial crisis on the industry yet.
“The projects that are under construction have to be finished. To finish a project is the way for developers to get their final payments. So we are relying on that fact and we are not seeing any slowdown. Our order book is full through the first quarter of 2009,” he says.
At this stage there might not be a slowdown, but that does not mean that it will not happen.
“The more mature markets and developments are still demanding our products and are continuing to do so. It is the others that might be on hold,” says Eugene Botes, technical director of Reichle & De-Massari MEA.
But he insists that this is a short-term outlook. “I don’t want to say that it won’t affect us next year. I hope someone will find the dollars and we won’t even know there was a recession,” says Botes.
Story continues below
Advertisement
|  |
|
Most of the projects that are being cancelled or put on hold are in the residential market.
“We have never really been active in the residential market. We have big projects not just in UAE, but going on in the Middle East and North Africa that are in the pipeline and are going ahead and none of them have been shelved yet. Some of them go back four years when the planning started, so these projects are going ahead,” he says.
Ducab is basing its budget on the fact that the company will grow next year, but at a slower rate. Ducab sells about 10 million metres of building wire a week which is the wire that goes into ceilings and walls of apartments and offices. Only about half of DUCAB’s business is related to real estate, the other half lies in infrastructure developments.
“Infrastructure providers such as Dewa and Adewa are playing catch up, and all of their projects are up and running. Projects such as Raha Beach, Saadiyat and Yas Island in Abu Dhabi will run through next year. Utility work is on at the islands using medium-voltage cables. Also in Dubai projects such as the Metro will continue to be built,” says Shaw.
Another indication that the market is on solid ground is that companies such as R&M and Ducab are hiring more people and expanding their facilities.
“We are in the process of looking for people in one or two key area, we want to grow our business,” says Botes.
Even though the cable industry is not seeing a glut of CVs from people employed in countries experiencing a downturn, there are enough qualified people in the region who are filling the positions.
“When an economy slows down, people are concerned that if “I leave now to a developing market that crashes as well, what will I come back to”? Risk of leaving is perhaps greater than staying. I think people would rather stay where they are and weather the storm,” says Botes.
Challenges
Counterfeit cables can be potentially dangerous and are a major concern for the cable industry worldwide. But experts are more concerned with the poor quality of cables in the Middle East as opposed to fake cables.
“We have already heard rumours that people are doing strange things with the cable, such as reducing the amount of copper in cables, and two years later
it is just a piece of wire. It is poor quality control on manufacturing, when you start cutting costs, the penalty you pay is by compromising people’s lives. A bad quality cable in a building will burn easily and put people at risk,” says Botes.
Falling prices
Construction costs have dropped hugely and copper has halved in value so cables prices might fall when that copper comes into the market. With falling prices of commodities, such as steel, there will be an automatic price correction in the market.
“We will have to adjust according to the copper prices, at this stage we have been able to sustain without doing that. If we pay less for the new stock that arrives next year, we will sell it for less,” says Botes.
“Steel prices are down. All of that inflation that was actually making some of the projects difficult will now diminish. There will be opportunity next year for developers to build at rates that were previously unimaginable. Some smaller developers who couldn’t build earlier, will be able to do so now,” says Shaw.
The Middle East market is peculiar, and in contrast to the European market, has challenges and pitfalls that are uniquely its own.
“The challenge here has been managing growth. Demand hasn’t been a problem, but we have to make sure we have enough supply. Either we service our customers or we are going to lose our share. We have added 300 people so far to our staff this year. These are nice problems to deal with – to manage growth and extra staff. It is just the opposite of what the European companies are facing,” says Shaw.
Recyclable value
Jeremy Hodge, chief executive of the British Approvals Service for Cables, says that copper in cables is one of the most recyclable of materials, as it has high value, is easily separable, and there is a ready market.
“Cables should not be burned to release the copper, as this is environmentally damaging and can introduce impurities. Specialist cable stripping equipment should be used. Copper used in cables is very pure. It is important that copper from cables is not mixed with copper from other sources, such as plumbing waste, because of the potential to introduce contaminants such as lead and zinc. The polymer compounds used in cables cannot be directly recycled for use in cables again,” says Hodge.
Internationally, key short term issues for the cable market at the moment, are downturns in construction and manufacturing in many countries, caused by the credit crunch, affecting customers of cable makers, and extreme volatility in the commodities and currency markets, particularly affecting copper and the US dollar, in which it is priced.
“In the background, the issues of global trade, cable quality and performance standards will continue to cause concern for many buyers of cable,” says Hodge.
Site Map
\
FEATURED COMMENT
Please click here to comment on this article