A fresh wave of confidence has been stimulating activities in the Middle East construction industry with UAE and Qatar's projects sector witnessing a particularly positive turnaround, according to formwork industry experts.
The UAE, it has emerged, is also being pitted against strong contenders Saudi Arabia, Iraq and Oman in the fastest growing regional markets category. The market uptrend has seen around 15 market players vying for a slice of an estimated USD 1.65 billion of formwork awards in 2013, said a senior industry executive at C-Vision Construction Materials Trading.
"As we all know, the market fell quite badly in 2012 in terms of contracts awarded (18% on previous year) and is only expecting a 6% increase this year. But we feel that confidence has been slowly creeping back into the UAE projects sector and will continue to do so in 2014 in the entire MENA region. In 2013, we saw UAE overtake Saudi in terms of contract awards and the market expects this situation to continue in 2014," said C-Vision's senior sales engineer Simon Roachford.
As the region starts to leave the shadow of the financial crisis, more construction activities have entered the market scene in 2012 and 2013, added Robert Hauser, managing director for Middle East and Africa at PERI.
"In terms of value of projects planned or underway, Saudi Arabia, Iraq and Oman were the fastest growing project markets. In March 2013, the overall value of projects amounted to almost USD 3 trillion in the Gulf region, which is an 18% increase compared to the previous year. With USD 910 billion, Saudi Arabia has been the biggest contributor to project volume in the region, followed by the UAE and Iraq," Hauser said.
"Even the UAE, being the country most affected by the 2008 crisis, recorded an annual growth of 17%. This positive trend is expected to continue - in light of the favorable macroeconomic environment in most of the Gulf countries."
DIVERSE GROWTH PATTERNS
On the whole, the GCC construction market has been steadily improving over the past 12-18 months and the uptrend is being felt throughout 2013, said Paul Williams, divisional operations director for the Middle East at RMD Kwikform.
"The two exceptions are UAE and Qatar. While the upward trend is now also visible in the former, the latter has only just started releasing projects after years of much promising," he said.
Within the UAE, Williams said Abu Dhabi, which did not suffer from a property crash as its neighboring Dubai, has not recorded any significant change. However, the UAE capital remains cautious in releasing projects with only a couple of notable major projects popping up in 2013.
"In Dubai, there has been noticeable growth from the beginning of the year with an increased tendering of projects and increased optimism that these tenders will come to fruition," he said, adding that Dubai's 2020 Expo bid has generated enthusiasm in the business community. "This [2020 Expo bid] will lead to significant growth levels in Dubai, with focus on the metro extension to the new trade center and related infrastructure."
Peter Adam Vogel, director of the Middle East operation of Doka Group, agreed that while the region as a whole has seen an uptick, the growth trends per country varies.
"We see currently growth variances in the overall Middle East market. WhileSaudi is growing tremendously, Qatar will see huge growth in the middle of next year. The UAE has stabilized on a certain level. Irrespective of the market conditions, we are growing in the region," he said.
Vogel added that independent surveys suggest Doka as having the highest market share of around 35% to 50% in the Middle East formwork industry.
A market as buoyant as the Middle East tends to attract several market players both regional and international. In the GCC, however, core international companies hold the majority share of the business, said RMD Kwikform's Williams.
"With the additional entrants, this situation is being challenged to a limited degree. Within the formwork industry, in certain markets, the number of players has increased - most notably from India and Asia. These players tend to be focused on smaller projects. In Qatar and Oman, there has been a noticeable increase in the number of players (branching out from their UAE base after seeing strong potential in these two markets)," he explained.
MATERIAL PREFERENCES
According to the October 2012 newsletter from the American Concrete Institute, Pittsburg Area Chapter, formwork is the term used to describe temporary or permanent molds into which concrete is poured.
The basic goal of formwork is to contain and support fresh concrete in a particular configuration until the concrete has cured. Depending on the concrete application, formwork systems range from simple to highly complex.
Wood, metal and plastic are three main types of materials used for concrete forms. Wood forms are generally timber, plywood or moisture-resistant particleboard. Metal forms are often made of aluminum or steel. Plastic forms are generally extruded or molded polymers such as PVC, PP or PE.
"The pros and cons of each of these materials must be weighed against the specific application or job. For example, wood is a readily available product and may be reused from a few to a dozen times. In contrast, metal is more expensive than wood, but may be reused up to 2,000 times," noted the ACI report.
WHY TIMBER
However, according to a Doka survey, approximately 85% of the Saudi housing sector (villas) is currently using traditional timber, which is a huge figure for the country, said Vogel.
"But we are very confident [of making] inroads into this market with our new systems, which will address the needs of fast construction in the medium and small customer segment. In Qatar, traditional timber comprises 60% of the market," he said, adding that the company is trying to change that scenario by encouraging smaller local contractors to explore its product line-up.
Known in the construction industry as a manufacturer of formwork for high-rise and mega projects, Doka has been diversifying and addressing other segments (infrastructure, industrial, petrochemical) during the last few years amid changing market needs and the emergence of new technology,
"In the last two years, we have introduced new systems specifically designed for the affordable housing sector and for use in shoring for the infrastructure sector," said Vogel.
Roachford of C-Vision said the regional market's preference for traditional timber as formwork material stems from the fact that labor is cheap in countries like Saudi Arabia and Qatar.
"We would like to see a shift in that trend, but that is obviously not happening as expected. However, if the cost of labor goes up, you might see a change in trend," he said.
PERI's Hauser agreed that one of the main differences in the cost of construction between the European and Middle Eastern markets is labor costs.
"In Northern Europe, high labor cost is prevalent, and oftenthe most significant cost in the project budget. As a result, construction companies put a lot of effort into optimizing their labor efficiency on construction sites. Modern formwork technology is seen as a key lever to maximize the concrete pouring rates per man-hour spent, thereby, [reducing] labor cost and time for completion," said Hauser.
BEATING THE ODDS
However in recent years, labor cost has also started to rise in several Middle Eastern countries, prompting contractors to optimize their on-site labor efficiencies.
"As a formwork and scaffolding supplier, it has given us the opportunity to introduce more advanced systems into the market," added Hauser. "While Germany remains the seat of production to maintain safety standards, nevertheless, the company is considering the internationalization of the supply chain strategy in the future under the strict adherence of our high standards."
Doka's Vogel mentioned that they have to adapt to a fast-changing market and make materials readily available.
"In the last four years, we deviated slightly from our growth plans, but we are more than satisfied with the market [performance] and are not looking to compare [it with] the unusual 2008 boom figures. We have always adapted our strategies with the market trends starting with the UAE. The years 2008 and 2009 were difficult years for the construction market overall, but we had positive results. We were affected by payments down the supply chain, but we were able to continue serving the market and [even widened our] marketshare despite the] difficult times. Our growth in the Middle East markets has been between 6% and 10%," Vogel said.
While international companies work to European/US standards, RMD Kwikform'sWilliams noted that safety remains a core challenge within the construction sector.
"Additionally, introducing new products can be difficult with customers who have existing stocks of equipment and opt for [current] suppliers in the market to top up their needs. Also, relatively low margins due to the current competition combined with a smaller project pool, are two other challenges within the formwork industry," added Williams.
Roachford, meanwhile, said that while the GCC is a very strong market place in terms of well- established companies with excellent products, it is also a very demanding region.
"Every day is a challenge to any business. But first and foremost, we try and stay one step ahead of the game and maintain an excellent dialogue with the construction companies and the relevant government departments (and changing rules)," he said.
SPREADING WINGS
Williams said their company continues to have a strong presence in the region. In 2013, they expanded their office base to include Iraq, a market that they have been supporting for a number of years on an export basis.
"It will be a major focus in the coming years. In general, we expect to grow steadily and sustainably across the region. In the UAE, we expect conservative growth - less in quantity but potential larger projects - mainly, within the infrastructure sector," he added.
This year and beyond, Roachford sees major potential in the announced Mohammed Bin Rashid City, the Qatar metro project and other infrastructure-related work in the country in anticipation of the 2022 FIFA World Cup,as well as the proposed major housing projects in Saudi Arabia. "In the coming year, we aim to grow organically in the UAE, Qatar, KSA and Iraq," he said.
Vogel said their company is seeing a high turnover growth in Saudi, which is its biggest market in the region.
"We see good growth in Oman similar to 2012, which was a good year. Saudi has the same good prospects and continues to grow. Qatar will start growing from the middle to end-2013 as the market has reached the tendering phase. Some contracts have been awarded, but will take time to commence and until we come into the stage of the project as the formwork supplier. We expect growth in all other markets, too. In UAE, the mega projects will come and we are ready to and able to cover the entire market," he mentioned.
© Zawya 2013
