Grey matters

Qatar's programme will put pressure on the supply of concrete

ANALYSIS, Projects, Building materials, Concrete, Qatar

Qatar’s construction programme will put pressure on the supply of vital building materials, not least concrete

The programme of construction in Qatar over the next five years means that there will be inevitable pressures on certain parts of the industry, not least materials. And arguably key amongst all of the building materials that will be utilised in the run-up to 2022 - and then 2030 National Vision thereafter - is concrete.

Even when dealing with construction figures relating to the small Gulf state, the recent projection by Advanced Construction Technology Services (NCTS) that overall spend on ongoing projects could reach $420.12bn by 2025 seems extraordinary.

That practically every one of the hundreds of projects that will happen between now and then will require significant amounts of concrete means demand will be vast.

“The outlook is very bright when you look at all the work that is going ahead with the World Cup and the 2030 Vision,” says Andrew Paylor, VP and GM of Readymix Qatar Group. “We have seen activity and enquiries picking up strongly and I’m expecting big things in 2014. People in the industry seem confident,”

In November 2013, the chairman of NCTS, Khaled Awad, said: “Expected demand on concrete in Qatar alone is at least 100m cubic metres in the next eight years. This is a very important indicator about the growth of large scale construction projects undergoing in Qatar, which also represents a major challenge for industry players to comply with the required Qatari building standards and specifications.”

In fact, companies say that they have already seen an upturn in demand, with 2013 widely considered to be a positive year for the industry, and a number of significant infrastructure awards in the first quarter of 2014 continuing the trend.

As a result of the spike in demand, many of the market’s leading firms have started to invest, enabling them to ramp-up supply.

For example, Qatar National Cement Company announcing in February that it is to spend $330mn on enhancing its production capabilities over the next two years.

As demand grows, it is a consideration all companies will have, says Bija Santha Kumar, sales and customer service manager at Smeet.

“The infrastructure contracts awarded in 2013 has created an uptrend for the cement and concrete companies. Most of the cement and concrete companies have started enhancing their facilities to meet the upcoming demand in the market. With the construction sector expected to grow more than 15% year-on-year, the cement and concrete industry is expected to have a huge growth in coming years.”

Falcon Readymix’s general manager, Nasser Assad, has also seen signs of a pick-up in business, as well as evidence of interest from some of the larger programmes.

“We have felt an increase in our sales recently, as well as taking enquiries from some of the infrastructure projects, such as the roads. I think it is a good sign for companies in the concrete industry.”

But the worry remains that the industry will find it difficult to manufacture the product as quickly will be necessary.

A report by the Global Investment House in October 2013 stated: “Given the rapid rise in cement demand, Qatari companies are still not ready to gear up capacity to meet the same. With no other major capacity addition announcements, we feel Qatar will face a major cement shortage scenario going forward.”

But speak to those working at the sharp end of the cement business, and the picture is slightly different. There is, they say, the capability of meeting the demand, but it is the procurement of the raw materials needed that pose the real problem.

“The local market is capable of meeting demand for materials like cement, steel and sand to a certain extent,” says Kumar.

“But it will face serious challenges in procuring key materials like gabbro and limestone, which are mainly imported from the United Arab Emirates. The construction sector in UAE is also soaring because of the recent bid win of EXPO 2020, which is expected to have a huge demand of primary building materials in the region.”

Assad comes back to the need to produce 100mn cubic metres of cement, and comes to the same conclusion.

“The main problem is not the 100mn cubic meters needed for the projects planned, it’s the availability of raw materials for concrete such as gabbro, which will be short in supply. The supply of these materials should go hand- in-hand in order to cater the need of 100mn cubic meters of cement.”

It is an issue that is only going to drive up the price of the raw materials, and in turn, the concrete itself, putting pressure on what is already a fast-track process towards 2022. “Heavy Investments in major projects and huge demand are likely to create certain supply bottlenecks, pushing up prices,” comments Kumar.

He adds that while process will likely rise, they will do so from a lower level. “It is inevitable that prices will rise. When you look back to 2006-2008, 30N (newton) of cost between $115-$125, whereas the range for the same amount currently is $80-$90. So when construction in Qatar gets into full swing, prices will certainly increase.”

With materials at a premium and costs likely to rise, it will be important that concrete companies are as efficient as possible, maximising resources and revenues. It is an area where readymix concrete can come into its own, such is the level of waste involved. “One of the major advantages of readymix is that you’re using the exact proportions of raw materials, which is mixed using automated systems.

“That means that there is no wastage, construction can be completed more quickly, and you know exactly the amount of raw materials you need to order, as you can keep strict checks,” says Kumar.

With so much business in the offing, there has inevitably been a number of new entrants to the market, leading to concerns about quality. However, The Ministry of Environment fired a warning shot across the bows of businesses in the concrete and cement markets who don’t share that point of view in February last year.

The body said it had intensified its monitoring of suppliers of limestone and gabbro (black granite) – two major substances used in concrete mixtures – in order to ensure they meet the required Qatari building standards and specifications, as substandard materials could lead to cracks in roads and buildings.

Paylor says the move is likely to drive out firms in what is a crowded market. “I think that in the past, some companies may have viewed the concrete readymix market as a way to make some quick money, which is unfortunate as it can tarnish a whole market sector.

“There are more than companies trying to find some share in the market and with the Ashghal projects, Qatar’s standards organisations are now pushing quality by going to companies and auditing and testing their products. I think it is a move which will either push people out of the market or force them to improve their standards.”

With the volumes of concrete being used in construction, the sector will always have question marks over the effect on the environment. But Kumar says that big improvements are being made.

“Traditionally, the concrete industry has been considered a major producer of GHG emissions, mainly due to the high environmental footprint of cement. It is estimated that during production of one tonne of cement approximately one tonne of CO2 will be released," he states.

“The industry is taking a number of steps to reduce the carbon footprint of concrete, from using less Portland cement and more fly ash or slag to enhance the mix with chemicals that allow working with less water.

“The introduction of coarse aggregate cooling systems are also helping to find ways to more innovative solutions including carbon sequestration.”

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