Large scale projects driving growth in GCC sector

Despite ongoing oil-price volatility, large-scale infrastructure investments are continuing to drive growth within the GCC’s formwork sector

SPECIAL REPORTS, Projects, GCC region, Oil price middle east, Oil prices and construction, Oil slump

For over a year, the Gulf’s construction industry has been plagued by the spectre of low oil prices. In June 2014, the price of Brent Crude stood at more than $100 per barrel. Today, you can expect to pay around half that amount.

Nevertheless, it is encouraging to note that whilst concerns – and lacklustre prices – persist, regional construction has remained largely resilient in the face of oil-related volatility. In August of this year, the total value of 2015 construction contracts within the Gulf region was estimated at $194bn, $2bn lower than in 2014. The report, GCC Construction Industry – Trends and Challenges for 2015, pointed out that lower oil prices are likely to result in reduced costs for building materials and transportation, which will in turn affect contract values. But despite this “slight dip in the overall contract awards”, the researchers predict that the GCC construction sector’s value will increase in 2015.

Andy White, vice president of DMG Events Middle East, commented: “A lot has been said about how oil prices might affect construction markets. But each of the GCC nations has continued to invest heavily in infrastructure, housing, and healthcare.”

Such investments, especially within the field of infrastructure, appear to be driving growth within the GCC’s formwork sector. Paul Williams, divisional operations director – Middle East at RMD Kwikform, says that regional long-termism is serving to maintain market stability.

“Despite weakened oil prices, political tensions, and military interventions in neighbouring and regional territories, construction markets across the GCC have – to date – remained generally buoyant,” he tells Construction Week.

This is particularly the case in Qatar, the UAE, Saudi Arabia, and Kuwait. Here, we can see that government commitments to longer-term infrastructure plans [in Saudi Arabia and Kuwait] and major events [in Qatar and the UAE] remain intact.

“Whilst we have experienced a recent easing in market activity levels in Bahrain and Oman, RMD Kwikform has generally witnessed strong performances across its GCC businesses this year. The team is forecasting an equally strong end to 2015.”

Jörg Hegestweiler, market unit director at Peri, is in agreement with Williams on this matter. Commenting on his company’s current levels of business in the GCC, he says: “Qatar and the UAE are showing very impressive figures, and all other markets show a solid performance as well. [This is] despite the economic and political difficulties in some parts of the region.

“All sectors are contributing well as Peri aims for a diversified contribution of all market segments. But [if I were] to highlight one [sector] in particular, it would be infrastructure, which sees massive upgrade programmes throughout the GCC – especially in Qatar,” he notes.

Peter Vogel, director for the Middle East at Doka Group, echoes this upbeat assessment of the Gulf’s formwork market. He points out that in addition to strong demand, local clients are seeking the early involvement of formwork experts for project delivery.

“The construction market – and as a consequence, the formwork market – in the GCC has been growing tremendously over the past couple of years,” he explains. “Numerous extensive and complex projects in all construction sectors are being realised, increasing the demand for reliable formwork suppliers who are able to provide the full range of services.

“Doka is becoming increasingly involved at an early stage on the majority of its clients’ projects, thanks to the growing awareness of the firm’s time-saving systems and processes,” says Vogel, who adds that megaprojects in Saudi Arabia, Qatar, and the UAE are “dominating the GCC market” at present.

“We are participating in the majority of these megaprojects as a partner of the contractors in the capacity of engineering, supply of system formwork material, and supervision. Specific examples include the STEP Programme in Abu Dhabi, UAE, and the Abraj Kudai development in Mecca, Saudi Arabia.”

Peri, meanwhile, is witnessing significant demand within the GCC’s infrastructure sector. The company was awarded a major share of Doha Metro’s Gold Line project (lead image). It also secured packages on Doha Metro’s Msheireb and Education City stations. Elsewhere in the region, the firm has scooped contracts on high-profile infrastructure projects ranging from airports to railways.

“Last year, Peri recorded its biggest project in the Middle East so far: the new Midfield Terminal Building (MTB) at Abu Dhabi International Airport,” reveals Hegestweiler. “Here, we delivered formwork materials sufficient to cover 10 soccer pitches.

“Peri also introduced a special scaffold technology to bridge access decks longer than 24m at King Abdullah Economic City (KAEC) Station, which forms part of the Haramain High-Speed Rail project. This lattice girder system (LGS) is based on our modular scaffold, ‘Peri Up’. It delivers the safest-possible working conditions whilst massively reducing the amount of manpower and materials that are required.”

Meanwhile, RMD Kwikform’s GCC business has benefitted from a raft of regional megaprojects. Williams explains: “[We have] undertaken some significant projects within the GCC, utilising our team’s experience and capabilities to deliver safe and cost-effective systems to meet complex project requirements. The infrastructure sector remains a strong focus for us, with Qatar and Saudi Arabia driving some of the largest projects we’ve seen in this region.

“For example, once completed, Qatar’s East-West Corridor will provide road access around Doha to new urban developments that are under construction. In Riyadh, Saudi Arabia, meanwhile, what will become the largest metro project in the world by value is currently under construction. Riyadh Metro will involve six lines stretching over 176km, so the need and variety of temporary works requirements are significant.

“Such projects involve bespoke, heavy-duty pierforms, Rapidshor and Megashor shoring, wall formwork, and our newly introduced temporary bridge system. These products and services can benefit from the support of RMD Kwikform’s dedicated site support teams, ensuring that works are completed safely and on time.”

Williams adds that in the UAE, he and his colleagues have been supporting Dubai Opera, which he calls “an interesting and challenging” development.

“Due to the complex curvature of its external walls, [Dubai Opera has necessitated] the use of RMD Kwikform’s 3D design capability to overcome the complex geometry of the structure,” he adds. “We have recently been awarded a project in the UAE utilising our UK-award-winning Ascent-S safety screen system, which demonstrates the growing awareness and importance placed on safety within the GCC construction industry.”

But are such high levels of formwork-related demand likely to continue in the Gulf? Is the region’s project pipeline sufficient to support growth over the longer term? Michael Arnold, managing director of Doka Gulf, is optimistic about the sector’s prospects, so long as suppliers continue to exercise caution when it comes to contract selection.

“Many projects are coming up in the design and tender stage,” he tells Construction Week. “That being said, the financial situation of all project stakeholders needs to be considered before formally engaging.

“The engineering offices are very busy at the moment, particularly in Dubai and the [UAE’s] Northern Emirates where new projects are being announced on an almost weekly basis. So in general, I believe the outlook in the next year is positive,” Arnold points out, adding that events such as Expo 2020 are likely to stimulate formwork-related demand across all sectors, from infrastructure to hospitality.

Peri’s Hegestweiler is also confident about the coming 12 months, claiming that his company’s product offering represents a competitive advantage. He tells Construction Week: “2015 is already a record-breaking year for Peri in the Middle East.

“Having such a strong set-up, we are optimistic that this trend will continue, and that we will outperform the market in 2016,” he predicts.

Although RMD Kwikform’s Williams is paying greater attention to global oil prices, he too is confident that the Gulf’s construction sector will continue to provide experienced formwork outfits ample opportunity to pursue growth.

“It is currently difficult to predict how 2016 will shape up in comparison to this year, given current issues facing the wider Middle East region,” he explains. “However, we remain generally confident that GCC governments, especially those of Saudi Arabia and Kuwait, will continue to push forward with their ambitious plans to improve infrastructure and diversify their economies. This, in turn, will serve as a catalyst to improve the level of investment and development by the private sector.”

Williams concludes: “We expect that lower oil prices will continue to have an impact on the level of private investment over the shorter term, but comparatively, government spend will remain relatively robust. On top of this, we will see the likes of the UAE and Qatar driving forward with their plans to deliver Expo 2020 and the 2022 FIFA World Cup, providing another year of opportunity.”

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