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Fiscal measures needed for MidEast piling contractors to remain profitable

The jury may still be out on the level of demand for piling projects in the Middle East, but what business leaders do agree on is this: growth is up for grabs, Oscar Rousseau reports


While there have been contract awards and project developments for enabling, shoring, and pilling work in the Middle East recently, industry leaders are split about the state of the market.

Chief executive officer of National Piling, Cheriyan Alex, says it is “stagnant”. On the other hand, the owner and chairman of RSG International, Raj Sahni, tells Construction Week that he expects to see a “rise in piling works”.

The first three months of 2018 has not seen a flurry of activity, but the year not been markedly lethargic, either. As an example, take MAG Lifestyle Development’s appointment of Dutch Foundation as its enabling contractor for the $150m (AED550m) mixed-use development MAG 318 in Dubai’s Business Bay.

This shoring deal preceded two enabling jobs. First, Damac Properties issued a tender for enabling work on its 30-storey Vera Residences tower. A day later, on 20 March, Indian-owned RSG International announced that Al Rabat Building Contracting Company had completed enabling and shoring work on the 54-storey, five-star hotel, Sabah Rotana.

“The market is stagnant now, compared to last year,” National Piling’s Alex tells Construction Week. “However, we feel that the market will improve by the middle of this year, and will then continue to grow apace for next two to three years.”

Compounding the stagnation is a rise in the prices of steel and concrete, which Alex says is a “major risk” to the industry. Steel prices are expected to increase by 8% this year, according to the Brussels-based World Steel Association.

For the construction sector, metal costs have become an increasingly concerning issue since US President Donald Trump announced plans to slap hefty tariffs on steel and aluminium imports. However, the knock-on effect that this may have for the Middle East remains unclear.

With rising steel and concrete prices, however, Alex suggests contractors need to implement judicious fiscal measures in order to remain profitable.

“There should be strict controls on the material price of steel, as most of the companies we know are working with very minimal margins,” he says. “As there are major construction projects in the pipeline, we feel that the coming three years will be very competitive, but progressive, for construction in the UAE.”

While he says the start of 2018 was “stagnant in terms of openings of new major projects” for National Piling, the company has not been bereft of opportunity. In January, Gemini Property Developers appointed the firm as the piling and shoring contractor for Symphony Business Bay, a 29-storey project in Dubai. National Piling’s 120-day contract is worth $2.5m (AED9.1m) and covers foundation, dewatering, piling, and shoring.

“Right now, we are executing the projects that were awarded during the last quarter of 2017,” Alex says. “However, we feel that within a period of three to four months, there will be plenty of project openings from the major investors in Dubai.” 

In Dubai, National Piling is now at the completion stage of enabling work at the Leader Sports Mall in Mirdif. The company also recently finished enabling work for Bloom Developers’ Bloom Tower project, which consists of three towers connected by a podium. This project, in Jumeirah Village Circle, is expected to be delivered in Q4 2020. 

In addition to Bloom Tower and the Leader Sports Mall, National Piling has 20 foundation pilling projects for Azizi Developments’ $3.2bn (AED12bn) megaproject, Azizi Riviera.

While Alex sees stagnation, RSG International, owned by Raj Sahni, has completed works on two projects, Sabah Rotana and the Burj Sabah, and is braced for more work. “We will definitely see a rise in piling works in the market, notably due to the government’s new policy regarding basements,” Sahni says.

“[The government] has approved construction of fewer basements and more podiums, which increases the scope for piling works projects. This move is an effort to make the projects more sustainable and to reduce energy costs. Reducing the number of basements ensures that the building’s lighting and ventilation needs are reduced and no additional equipment or power is required.”

Sahni says that one of the most important recent developments in the area of piling is an improvement in the quality of the  materials used on site. “We see a significant improvement in the concrete quality, with newer variants becoming available in the market that complement the piles perfectly.”

He continues: “The advanced methods used for the testing of piles has considerably reduced the burden on developers by not only increasing accuracy but also cutting down the time taken to reach completion”

RSG appears to be buoyed by both of these developments. The UAE government’s policy on basements and podiums, in particular, is likely to put extra wind in the company’s sails as it attempts to follow up its “eventful” 2017 with more UAE piling projects this year.

And despite the stagnation in the market that has been reported by National Piling so far this year, its CEO Alex is still hopeful that more projects will be coming online thanks to “fast but steady progress towards technological awareness”.

Going forwards, it is likely that a focus on cost control and real value-engineering will be seen in the segment, in addition to an increase in the use of ground improvement techniques such as vibro compaction for shallow building foundation works.

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