OBG talks to Naser Bustami, Group General Manager, Stevin Rock

Interview: Naser Bustami

What needs to be done to develop Ras Al Khaimah’s logistics and transport infrastructure to further expand the rock and aggregate sector?

NASER BUSTAMI: The rock and aggregate sector will directly benefit from several projects that the federal government, through the Ministry of Public Works, will complete within the next few years. The first project is the extension of the ring road, which will be completed by 2016 and will allow us to move materials from our location directly to the Emirates Road. Another project is the federal railway, which is under construction in the southern part of the UAE, and will reach Saqr Port here in RAK. The project will take around six to seven years to complete. The third project is the expansion of the berths in Saqr Port by the end of 2016, which will allow us to bring larger-size vessels that can come down to a draught of 16 to 18 metres, making our quarry industry more competitive and cost-effective.

These projects will significantly improve the emirate’s logistics and transport infrastructure on road, rail and sea. Consequently, the competitiveness of RAK’s rock and aggregate sector will be ready to jump to the next level once these are completed.

How will the 2022 FIFA World Cup and Dubai’s bid to hold the 2020 World Expo impact on supplyside dynamics and pricing?

BUSTAMI: The Qatari government has allocated between $75bn and $80bn for infrastructure development for the World Cup. A new airport has been built, a new port is being developed and an extensive road network has been planned. Additionally, Qatar will increase the number of hotel rooms to accommodate visitors for the event. These projects will have a major impact on the demand for asphalt and construction aggregates. As such, the supply of these materials from our side will rise and our industry will directly benefit.

Dubai will also play a key role in increasing the demand for construction materials and aggregates over the next five years. A brand new city has been recently announced, specifically for the Dubai 2020 World Expo. Additionally, several other construction projects will contribute to the need for more materials, like the new Mohammed bin Rashid City. Dubai is showing signs of recovery, which has attracted a number of investors from the region, stimulating the demand for more real estate development.

To what extent is the volatility of cement pricing inevitable. Is this something that is particularly prevalent in the region and if so, why?

BUSTAMI: The cement industry began to expand in 2005, and today the sector has excess production capacity. However, as the construction sector bounces back, the industry has the capacity to meet increasing demand. Any growth in the construction sector from now on will cause a correction in cement prices, bringing them back to international levels.

The construction industry cycle is generally more stable in the developed world because the infrastructure has already been built, whereas cities in the Gulf region continue to be built today. Dubai, Doha or RAK, for example, were completely different just 10 years ago. The development that these cities and many others have experienced in the last decade is considerable; construction in this region is more dynamic.

How have industry concerns over energy supplies been addressed, and what more needs to be done?

BUSTAMI: The sudden growth in RAK has led to an energy shortage in the last four to five years, similar to that in other emirates. The government hopes to address this by building a nuclear power plant within the next four to five years in Abu Dhabi. At the local level, the government of RAK is in talks with a major power generation company to build a 600-MW, dual-fuel power generation plant that can run on either gas or coal. The government of RAK also announced the creation of RAK Electricity and Water Authority, a key step towards encouraging more foreign investment here.