Industrial steel structures rise above downturn

Steel buildings and structures have benefitted as construction within the industrial sector has not been affected much by the economic slowdown, a senior official of Amana Steel has said.

Riad Bsaibes, Chief Operating Officer of Amana Contracting and Steel Buildings, spoke to Emirates Business about the construction industry in the region, his company's performance and the future of steel structures.

Founded in Abu Dhabi in 1993, Amana is one of the leading players in the design-build of industrial and commercial facilities, with more than 1,500 buildings constructed across the region.

Today, Amana has offices in 11 cities across seven countries. Each office is independently run with capabilities to market, design, procure and construct projects on a full design-build basis.

During the past six months Amana has won several contracts whereby the company has experienced a better growth during the first half compared to the same period last year. The price of building materials has dramatically slowed down during the past year, said Bsaibes.


What is the current situation in the UAE as far as the construction sector is concerned?

The global financial crisis has affected the construction sector across the globe although the impact on the region has been much less. Within the UAE there has been a slowdown in activity as far as construction activity in Dubai and the Northern Emirates is concerned compared to last year. Abu Dhabi has slowed down as well compared to the previous year. But there has been a lot of construction and it continues to be robust.

How would you place the situation across the GCC?

At Amana we are exposed to the prospects and risks of construction industry across the region. It has been a mixed outcome with some markets continuing to perform better compared to others. In Saudi Arabia and Qatar, we are able to witness a construction industry that is robust. We are able to witness the slowdown in Kuwait although there are a lot of structural reasons attached to it. In Oman it has been slower than last year. Overall there has been a movement as far as infrastructure development is concerned. It has not been affected as much as other sectors.

Steel buildings was also hit in the downturn but in this part of the world, it is mostly used in industrial sector. Industrial sector has not been affected as badly as the residential sector, especially in Dubai.

There has been a drop in the construction costs. How is the industry benefitting from it?

Construction costs have definitely reduced following a drop in the prices of building materials. Steel prices went down massively compared to last year.

We saw a lot of projects being renegotiated with developers trying to bring down the contract value. This was specially true in contracts signed over an year ago when the prices were really high.

The drop in building materials happened between October 2008 and April 2009. But for the past few months we have seen it stabilising.

However, the bottleneck now is the availability of finance, which more or less has become a driving factor than the cost of construction itself. The finance issue is the critical element. However, we see witnessing the situation improving.

How do you expect the building material prices to move forward?

We are expecting the building material prices to start increasing by the end of the year if not before. This is basically for two reasons. First, the global economy looks like it is beginning to hit the bottom. Second, the oil price is already around $70 and commodity prices in general will increase in line with oil prices.

The cost of energy is an important factor in every commodity. We expect that the cost of building materials to go up. Moreover, demand from China and India is growing.

We are cautioning the clients that if they continue to retender the project until the end of the year they might find surprises. I don't expect the prices to jump but it is going to gradually go up.

What is the situation as far as Amana Contracting and Steel Buildings is concerned?

Our position has been quite good. We are currently working on about 40 to 60 projects across the region. We have a healthy backlog.

The first half of 2009 has been a growth year for us compared to 2008. Given the present situation its ironic but we have achieved it as we have a presence across the region. We have not been affected like contractors who are concentrating on one city. The downturn that has affected us in Dubai has been offset by contracts in Qatar and Saudi Arabia. Our growth in 2008 was in line with the growth in the construction industry in the region.

How do you expect the second half of 2009 to be?

As far as the overall construction industry is concerned, the situation is going to improve. Several contracts are being awarded and that is a clear sign of an improvement in the liquidity situation. Also companies are realising that it is better to build now.

As far as our company is concerned, 2009 is going to be a growth year on the top line. It is too early to talk about 2010. We are applying for several new contracts and we are hopeful of doing better than how we performed last year.

How many new contracts did you win during the last six months?

The latest one is for additional work at Masdar City. We will be working on auxiliary buildings for Phase B.

Three weeks ago we won a turnkey contract from Qatar International Cable Company for the construction of a cable manufacturing facility at Messaieed Industrial City. The 19,000 square metre facility will be built on 75,000 sqm of land. The specifically designed factory will be constructed on a fast-track basis with construction work already under way. The project will take 365 days to complete.

We also won a turnkey contract to construct a manufacturing facility for Jubail Metal Galvanising Company at Jubail Support Industrial City in Saudi Arabia. The facility totals 4,400 sqm and will require eight months to complete. Work on the project is expected to start within weeks.

In June, we won a design-build contract from Advanced Oil Field Technology Company to construct a fabrication workshop in Oman. Work on the project started in mid-July and will require 240 days to complete. Similarly Al Marai Company award us a contract to design and build a new bakery production facility at Haradh Road in Al Kharj in Jeddah, Saudi Arabia. Work on the 40,000 sqm facility will will be completed in 365 days.

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