This is an abridged version of the full article, which appeared in the November 2012 issue of World Cement. Subscribers can view the full article by logging in.
The last few years have been turbulent ones for the cement industry across the Middle East and North Africa (MENA) region. The slowing down of the global economy and the Arab Spring have taken their toll on both the regional and global markets of many industrial sectors, and cement is no exception. With construction projects being put on hold or shelved indefinitely throughout the area, demand for cement has dropped; even construction heavyweight, the UAE, has been forced to suspend projects on a hitherto unprecedented scale. There have been times, too, when certain plants have had to suspend operations entirely due to civil unrest.
Though there is still unrest in the region relating to the Arab Spring, this – with a few notable exceptions – has largely moved away from violent rebellion. In most of the MENA countries, the lack of direct and physical obstruction to production has allowed, it seems, for the beginnings of a steady return to industrial growth. The reinvigoration of many construction projects, as well as the inauguration of new ones, has caused a step-up in cement demand across the region. Indeed, according to ‘Global Construction 2020’, it is anticipated that the MENA region will spend US$4.3 trillion on construction during the next ten years, with the sector set to grow by a staggering 83%.1
Policies across the GCC focusing on development, construction and infrastructure have driven it to become one of the world’s fastest growing construction markets. The reinvigoration of these policies since the region’s 2008 real estate crash have resulted in a huge programme of development plans worth billions and are sure to keep the demand for cement high for quite some time to come. In 2011, construction projects worth US$57.8 billion were awarded across the combined residential, commercial, hospitality and retail building sectors of the GCC countries, and projections show that figure is likely to total US$65.5 billion this year.2
To a certain extent, this spending has helped to reduce the area’s historic economic dependency on oil reserves, boosting other facets of the economy. That said, without the recent political instability across the rest of MENA driving oil prices upwards, and the resultant benefit that this has had for the combined GDP of the oil-producing GCC members, it is possible that this spending power would not be in place at all.
In any case, the spending has helped to shield the GCC countries from the worst effects of the global economic crisis. Indeed, the current economic climate in Europe combined with the Arab Spring, whose effects have been felt more firmly throughout the rest of MENA, has driven much real estate investment away from those areas and towards the greater stability of the GCC economies, providing a further boon to construction and, therefore, the demand for cement.3
Though cement prices remain high across the GCC in the wake of the difficult period of lost momentum experienced during 2009 and 2010, as a rule, turnover has increased and the combined revenue of the region’s cement companies increased by around 14%, to US$4.6 billion in 2011.4 The individual industries of the UAE, Saudi Arabia, Oman and Kuwait were pulled into a recovery by large-scale government infrastructure projects and spending.
To get a true feel for the condition of the cement industry in the GCC, though, it is worth considering each country in turn.
With the 2022 FIFA World Cup on the horizon, Qatar is set to become an exciting hub of construction activity over the next decade. Qatar’s cement prices remained largely stable over the last year due to government controls. Though the country still has the highest per capita cement demand (2600 kg) of any in the GCC, this figure has fallen slightly over the last few years.5 This could, in part, be attributed to the fact that contracts for the 2022 World Cup have still not been assigned. However, it is worth noting that the country has also recently completed the infrastructure for its gas-exports industry. Not only has this contributed to the shrinking of the country’s GDP growth to 6% from last year’s 14%, but undoubtedly the completion of such a large infrastructure project will also have taken its toll on cement demand. A plan for the infrastructure programme that will accompany the World Cup has been laid out, but its implementation has not yet begun. The budget for associated projects in the coming year alone is US$17 billion, and the next decade should see more than US$100 billion being spent on road, rail and various other infrastructure projects. Although the Qatar 2022 Supreme Committee has signed an agreement with various authorities to boost coordination, government officials have said that private sector businesses must be patient. Earlier this year, Qatar National Cement’s (QNC) board of directors announced that the company had issued an international tender for the construction of a new plant at its Umm Bab base.6 Though the company’s initial feasibility studies considered a plant of around 1.5 million tpa, it is possible, depending on the exact site chosen, that the eventual plant could be substantially larger. Nevertheless, the company has reported that it is “receiving quotes” for the project.6
To put this into context, Qatar’s total output in 2010 and 2011 was 4.5 million and 4 million tpa, respectively. Demand is projected at an average of 7 million tpa from 2013 – 2022, peaking at 11 million t in 2017/2018. Even with QNC’s planned expansion meeting a target of 1.5 million tpa, an average output of 5.5 million tpa is expected, still leaving half of the projected peak demand to be imported – perhaps good news for Qatar’s neighbours. Until the World Cup infrastructure projects begin to pick up the momentum necessary to fill the shoes of the country’s now-finished gas infrastructure, it seems that the Qatari cement industry, like the wider Qatari economy, will continue to pause to catch its breath.
- Oxford Economics and Global Construction Perspectives, ‘Executive Report’, Global Construction 2020, (2011), p. 8.
- Ventures Middle East and ConstructArabia.com, GCC Cement, Concrete and Stone Update, (2012), pp. 3 – 4.
- Ventures Middle East and ConstructArabia.com, GCC Cement, Concrete and Stone Update, (2012), p. 3.
- Ventures Middle East and ConstructArabia.com, GCC Cement, Concrete and Stone Update, (2012), p. 12.
- KARMANI, H., ‘Cement Outlook on Kuwait, Bahrain and Qatar’, Proceedings Middle East CemenTrade 2012, (2012), p. 26.
- Construction Week Online, Stable Url: http://www.constructionweekonline.com/article-18013-qatar-cement-tenders-for-new-plant/ (August 2012).
Written by Jack Davidson. This is an abridged version of the full article, which appeared in the November 2012 issue of World Cement. Subscribers can view the full article by logging in.
Read the article online at: https://www.worldcement.com/africa-middle-east/29102012/regional_cement_market_report_gcc_qatar_718/