Concrete Answers

Qatar

Economic News

22 Jul 2010
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A shortage of cement is threatening to halt much construction work in Qatar, as it races to be ready for this year's Asian Games.



With stocks dwindling, Qatar's ready-mix cement companies are estimated to be working at less than 25% of their production capacity.



The Qatar National Cement Company (QNCC) had earlier embarked on a 1.2m tonne-per-year expansion project, which was intended to come online at the end of last year, yet the facility is still not operational.



This week QNCC announced that the facility will begin partial production next month but will not be fully online until November. At the same time, there are newspaper reports that a "floating" cement production unit has arrived in Doha Port but, due to a lack of berthing space, has not been able to start operations.



Some ready-mix companies have also levelled criticism at the Ministry for Economy and Commerce for its decision to ban the use of trucks that are more than seven years old. This has left the construction industry with far fewer vehicles with which to bring in supplies from outside.



The shortage is expected to severely affect Qatar's large number of mega projects which include the Pearl project, Lusail and the development in the West Bay area. Local demand for cement is currently 13,000 tonnes per day and it has been estimated that as more large-scale construction projects are announced, this will increase to 25,000 tonnes per day.



For the time being, however, construction work is slowly grinding to a halt and this has troubling repercussions not just for the big real estate developers, but for the Asian Games as well.



Much of the $2.8bn invested in the Games has been in construction work and with the event opening in Qatar on December 1, fears that the country will not be ready are once again beginning to surface.



This is not the first time the country has undergone a cement shortage. In 2004, the QNCC found it was unable to match the increasing demand for its products. The price of cement soared and the company, which had previously been a net exporter, was forced to make up the shortfall through imports.



The industry recovered in 2005, although the price of cement remained high and the massively oversubscribed initial public offering (IPO) of the Gulf Cement Company earlier this year was testament to just how much value is currently placed on building materials.



The recent slowdown in construction will further squeeze the real estate sector. Qatar has seen enormous hikes in rent over the last year as demand for housing has far out-stripped supply.



The increase in construction has been matched by an increase in demolition, as many of the older buildings are torn down. This has meant rents have more than doubled and the increasing price of housing has meant inflation in Qatar, which had previously sat at around 1%, has shot up to as much as 6%. Those in the low income bracket have been worst affected, and many of the construction industry's expatriate workers have been forced to send their families back home.



In January, a ruling capped rent hikes at 10%, but in reality that has been difficult to enforce and applies only to unfurnished apartments.



While the new real estate projects are mostly high-end developments unsuitable for low-income workers, it had been hoped that as these developments were completed, rents at the lower end of the spectrum would be forced to roll back. However, with the cement shortage forcing the pace of construction work to slow, a corresponding drop in rental prices may be further away than expected.



For the time being, certain construction projects are thought to be being given priority, but the Doha Asian Games Organising Committee could not confirm to OBG that this included projects related to the Asian Games. The Qatar Chamber of Commerce and Industry (QCCI), which until recently had been somewhat hamstrung by internal election difficulties, agreed to meet last week to discuss possible solutions to the problem. The QCCI's decisions will be hotly anticipated. With a pressing need for housing and the Asian Games only months away, Qatar cannot afford a prolonged shortage of this precious building material.

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