Raft of new construction projects to affect materials prices in Qatar

With $500m a week being spent on infrastructure projects in Qatar over the next three to four years, supplying these projects with the materials they need is in itself an epic task. Many have predicted that this volume will produce a price squeeze in the years up to peak construction, ahead of the 2022 FIFA World Cup.

Under Control

Thanks to foresighted improvement to the country’s transport and logistical networks, careful government monitoring and a general downturn in construction activity elsewhere in the region, price increases have so far been kept to a minimum. However, construction costs in Qatar remain the highest among GCC member states. Indeed, the “International Construction Costs 2017” report by Netherlands-based engineering consultancy Arcadis shows Doha ranking 11th highest worldwide in 2016, with New York being number one. The closest regional peers were Jeddah at 18th and Dubai at 19th. Doha had climbed one place since 2015, with the report warning that the high volume of work required careful handling of supply chains if a negative impact due to inflation was to be avoided.

This places significant responsibility on the local construction materials sector, with the years ahead likely to see continuing demand for cement, steel, glass, sand, crushed stone, bitumen and other essential building blocks. It is also likely to lead to higher demand for the services of importers, which are able to use the facilities of the new Hamad Port (see Transport chapter).

Cement

Qatar’s demand for cement was expected to reach 5.7m tonnes in 2017. Meeting much of this need is Qatar National Cement Company (QNCC), which has a pedigree dating back to a 1965 emiri decree. Located at Umm Bab, on Qatar’s western coast, QNCC has three plants. The firm sold 3.7m tonnes of cement in 2016, while also announcing plans to build a new Plant 5, which will boost production capacity to 5500 tonnes per day. Construction work on this kiln should be completed by the second half of 2017, with QNCC also planning to boost its production capacity for washed sand and calcium carbonate during the 12 months ahead in anticipation of rising local demand. QNCC produces ordinary Portland cement (OPC), sulphate-resistant cement, hydrated and calcined lime, and washed sand.

Al Khalij Cement Company hiked its production by 50% in 2015, making it the country’s largest producer of OPC. Output capacity rose to 15,500 tonnes per day that year, with the inauguration of a new $95.9m production line. Another major producer in Qatar is Lafarge, with the company recently winning a ground-breaking contract to supply 1.1m tonnes of recycled aggregates for the construction of a domestic oil refinery.

Imports

Qatar suffers from a shortage of aggregates due to high demand and the poor quality of local limestone. As a result, much of the country’s needs were until recently imported from the neighbouring UAE. Readymix Qatar and Qatar Quarry Company are also involved in the recycling business, which should address some of the local shortfall. Imported cement is a growing sector, with Qatar Primary Materials Company (QPMC) set up in 2006 to facilitate this and the import of other materials. QPMC stockpiles aggregates, produces washed sand and regulates the sale of dune sand in the local market. It is also behind cement silos at the gabbro berths at Mesaieed, building on its import capacity at Umm Bab. The firm has a logistics arm at sea and on land, and is developing gabbro quarries outside of Qatar to ensure supply.

Since the June 2017 blockade imposed on Qatar by its neighbours, the construction sector’s main challenge has been the availability of materials, which previously came from or through Saudi Arabia and the UAE. However, the blockade could be a boon for local suppliers and contractors, with the government and the private sector pushing for initiatives to expand local industries and achieve self-sufficiency. The cancellation or mothballing of projects as a result of budget cuts may also provide a silver lining for Qatar’s hard-pressed construction materials sector in the year ahead.