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UAE ready mix concrete capacity set to grow 8%

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Rise in infrastructure and real estate spend generates demand

Published: Tue 3 Feb 2015, 10:25 PM

Updated: Tue 27 Sep 2022, 10:40 AM

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  • Staff Report

Fujairah — The rebound in the real estate and construction sectors in the UAE bodes well for the Ready Mix Concrete (RMC) industry. After registering 6.9 per cent growth in recent years, RMC production in the UAE is set to rise to eight per cent annually in the coming years, according to global analysts.

Dubai and Abu Dhabi account for approximately two-thirds of the RMC production market in the UAE. Fujairah is starting to gain more importance in the RMC market as it welcomes mega oil and gas developments worth over $7 billion, along with accompanying support developments of housing, social and retail services.

However, Saudi Arabia is the largest RMC market in the GCC, hosting approximately half of the GCC construction projects by value till 2019, amounting to $1.1 trillion. Such contracts comprise projects in the sectors of residential (30 per cent), healthcare (20 per cent) and education (10 per cent).

Such projects have driven up RMC demand in Saudi Arabia by 10 per cent since the 2008 financial crisis and demand is expected to grow further to 15 per cent by 2016.

Saudi Arabia’s transport sector (aviation and rail) also constitutes a significant proportion of the high-value construction contracts awarded.

The increased RMC demand can also be attributed to tourism in the holy cities of Makkah and Madina which are expected to host major hotel constructions and other hospitality and retail developments.

Lately, RMC prices in Saudi Arabia have seen steady increases, forcing officials to cap them. Saudi RMC companies are among the most profitable in the industry globally, with net margins of 50 per cent and above.

The situation in the UAE is competitive, with approximately 50 RMC players operating across the seven emirates.

There is an average of 182 batching plants in the UAE, with the vast majority functioning as small, local organisations with a single plant operating at a comparatively low production capacity.

As these RMC operators are focused in Dubai and Abu Dhabi, other emirates such as Fujairah open more window for profitable operations.

Among those that have built substantial capacities is Oryx Industries, which today controls over 10 per cent of total RMC operational capacities in the UAE.

Adding to the positive outlook for Fujairah-based RMC producers is that only around three per cent of global production is traded across borders, meaning those producers strategically positioned are in a situation to capitalise on the booming economies of nearby countries.

Fujairah has an additional market advantage. Almost 65 per cent of the production cost in the RMC industry is linked to products of quarries, a sector where Fujairah takes a lead regionally.

For RMC companies based in Fujairah, there can be substantial savings on material cost, improving its position in competing for demand.

The latest drop in aggregates pricing post the financial crisis has helped RMC companies in both KSA and UAE stock raw materials at lower prices.

Majdi Khalaf, vice chairman and group CEO of Oryx Industries, referred to this encouraging situation as “a combination of effective planning, favourable market changes and a fortunate abundance of natural resources”.

— business@khaleejtimes.com



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