A key ingredient: Domestic production of building materials is ramping up in anticipation of rising demand

In the past five years Doha has announced plans for a new railway system, a new port, nine stadia, and new highways and roads. These plans, in conjunction with tourism- and retail-related projects, are set to stretch Doha’s transport capacity to its limits. In the period surrounding the 2006 Asian Games, Qatar saw a flurry of construction activity that contributed to shipping bottlenecks and higher materials costs, helping to drive overall inflation to 15.2% in 2008, according to the Gulf Times. This time around, the authorities say circumstances are different. “In 2006, we saw a very different situation compared to what we have now. We had to execute all the projects within a tight time frame, and were faced with a very sudden inflow of people into the country,” R Seetharaman, CEO of Doha Bank, told Reuters in May 2013. “Now, we have enough time to execute these projects; it will be done gradually over the next five years. The time frame will help in acting as a stabiliser in preventing inflationary issues.” With more than $200bn in construction projects planned over the next decade, demand for building materials in Qatar is set to reach record heights in coming years, according to a survey released by the Ministry of Development Planning and Statistics (MDPS) in August 2013. According to the survey, the construction sector will require an estimated 515m tonnes of limestone, 264m tonnes of gabbro, and 166m tonnes of spoil removal and disposal. The uptick in consumption could create opportunities for materials suppliers, logistics providers and other related industries.

Heavy Metals

With so many construction projects on the way, metals demand in Qatar is set to rise, and Middle Eastern producers are ramping up production to meet contractors’ needs. Between 2006 and the fourth quarter of 2012, the MENA region’s steel production grew from 20m to 27m tonnes, according to US-based Frost and Sullivan. In the first half of 2013 the region produced 18m tonnes of steel.

In 1974 the government set up the Qatar Steel Company, which became part of state-owned Industries Qatar in 2003. Production has risen steadily over the past few years. Between 2010 and 2012, crude steel production rose just over 10% from 1.95m to 2.15m tonnes, according to the company’s 2012 annual report.

Rebar, or reinforced steel bar, production rose about 15% from 1.71m to 1.97m tonnes. As for aluminium, another crucial construction metal, Qatar’s industry is younger but growing fast. Qatalum, a joint venture split evenly between state-owned Qatar Petroleum and Norway-based Norsk Hydro, has been producing aluminium locally since 2009. Between 2010 and 2012 primary aluminium production grew from 172,000 to more than 627,000 tonnes, according to data from the Dubai-based Gulf Aluminium Council.

Natural Gas

While Qatar’s domestic industries have come a long way, their production will almost certainly need to be complemented by imports. The steel and aluminium industries in the neighbouring UAE are also expanding at breakneck pace, and they will require large quantities of natural gas to keep their production lines going. In April 2013 Abu Dhabi-based Mubadala Petroleum and partners Total and Occidental said they were keen to boost gas supplies from the Dolphin Pipeline, which links the two countries.

The availability of competitively priced natural gas is a key component of the region’s steel industry. Cheap electricity is also a crucial part of the GCC aluminium industry, since electricity makes up about one-third of the cost of producing aluminium. For Qatar and its Gulf partners, the combination could be mutually beneficial, creating opportunities to trade gas for metals and other materials. Qatar has exported gas via the 182-km Dolphin Pipeline since 2007. By 2010 a 244-km extension connected the pipeline to the UAE port of Fujairah on the Arabian Sea. With the infrastructure already in place, Qatar’s immense energy reserves are linked to both the UAE and Oman.

Aggregate Demand

Although materials like steel and aluminium often receive more coverage, consumption of other construction staples like gabbro – a rock aggregate used to make concrete – is also set to rise. Over the next few years, the state’s construction sector is set to use 265m tonnes of the aggregate, according to data from the MDPS. The government is taking steps that would mitigate upward price pressures. In 2006 it created the Qatar Primary Materials Company (QPMC) in order to boost efficiency in raw materials management and ensure that strategic stockpiles are available. The firm works on the storage, import and domestic production of the raw materials needed to fuel the state’s construction boom.

In August 2013 QPMC signed an agreement to enlarge its gabbro processing facilities in the port of Mesaieed. In February 2013 the gabbro port terminal managed over 100,000 tonnes of the aggregate two days in a row, a record high for the company. The Gabbro Terminal Expansion Project will allow importers of the aggregate to import large volumes directly, reducing truck traffic around the port and allowing for smoother offloading. “We expect to increase the discharge capacity at the gabbro berths in Mesaieed to 30m tonnes per year from its existing 20m tonnes,” Khalid Al Rabban, QPMC’s chairman, told press after signing an engineering and procurement contract with Denmark-based FLS midth and Belgium-based Six Construct.

QPMC estimates the project will take just under 30 months to complete. The additional capacity will likely be welcome, given the anticipated rise in demand. Between 2014 and 2016 gabbro berths are expected to handle between 60m and 80m tonnes of gabbro per year, according to a construction materials demand survey released by the MDPS in August 2013. Strong demand has already begun to push up prices, which rose by as much as 20% during the first half of the year. Consumption of other aggregates is set to increase as well. Between 2012 and 2022, for example, the ministry’s survey estimates the country will use more than 500m tonnes of limestone.

Cement Supplies

Demand for cement is set to surge as well. Driven by construction, use of the material is set to peak at 57m tonnes between 2013 and 2017, according to the MDPS’s 2013 survey. The country has two domestic producers of the material, the Qatar National Cement Company (QNCC) and Al Khalij.

QNCC, the larger of the two players with a domestic market share of around 70%, issued a tender for a new factory in April 2013. Following the completion of the new facility in 2015, the company expects its production capacity to rise to around 6.6m tonnes per annum. In November 2013 the firm announced a fifth cement plant that could produce between 5000 and 7500 tonnes of clinker per day.

The second local player, Al Khalij, also has plans to expand capacity. In December 2013 the firm signed a deal with Denmark-based FLS midth to build a cement production line at its plant in Umm Bab, duplicating a line the Danish company built in 2007.

QPMC is also taking steps to facilitate imports, and is working on a cement silo near its Mesaieed gabbro berths. Upon completion, this would be able to store and distribute over 2m tonnes of cement per year.

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The Report: Qatar 2014

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