The boom in the construction sector has led to an increase in prices of all types of building materials, and power cables are one of those. The price of copper rods used in making the cables has increased more than five times in the past three years.
To meet the huge demand, Dubai Cable Company (Ducab) – which is equally owned by the Dubai and Abu Dhabi governments – has come up with different expansion plans and projects. Andrew Shaw, managing director of Ducab, talked to Emirates Business about his company’s business and expansion plans and what Ducab is doing to cut costs and increase production in an environment of surging demand.
What is the progress on the Dh125 million copper rod factory in Abu Dhabi?
In January 2007, we announced projects worth a total of Dh660m mainly in Abu Dhabi, and also Dubai. We have two factories – one in Dubai and the other in Abu Dhabi. We are expanding in Abu Dhabi with two factories, which will be completed this year. The first one is the copper rod project in Abu Dhabi that you have asked about, with a total capacity of 120,000 tonnes per annum. It will be ready by June. The facility will mainly supply our power cable factories. About 80,000 tonnes of the copper rod will be used by us this year, and the rest will be sold to other Gulf countries, the Middle East, Asia and parts of Africa. We are also going to add to our factory in Abu Dhabi a specialised facility to manufacture low-voltage cables. This will be ready by the end of the year.
What is the reason for setting up the copper rod facility in Abu Dhabi?
We chose Abu Dhabi as we need natural gas to run these factories and Abu Dhabi was the best location considering the easy availability of gas.
How will the new copper rod factory help you to meet the high demand and control the cost of production?
Copper rod is one of our main raw materials and more than 60 per cent of the value of a cable is made up of the copper used. So instead of buying copper rods from outside, we are going to make them here. This will help in us in controlling our costs better. The price of copper is set by the market, but we are aiming to cut down on the cost of converting copper into rods. We estimate a cost reduction of 30 per cent.
How is the competition Gulf-wide and in the UAE?
There is a lot of competition. In the UAE, there are four factories – one in Sharjah, one in Ras Al Khaimah and two in Abu Dhabi. Therefore, there is no shortage of cable manufacturers. However, we are competing with them on quality. Also, the market in the UAE is open and we have to compete with imports from Saudi Arabia, Oman and other Gulf Co-operation Council countries.
Who is the main supplier of copper?
We import copper from India, Russia, Egypt and Saudi Arabia, but India is the main supplier with more than half of our supplies coming from there.
What are the main reasons for the increase in the price of copper?
The copper market is an international one, and prices have increased more than five times in the past three years. There are many reasons for that, but the main reason is the huge increase in demand in China and India due to the strong growth in both countries. The expectation is that copper prices will remain high in the near future.
How much of this increase is passed on to the customers?
We cannot control the increase in copper price, and so we sell copper cable as per the market rate in a particular period. Therefore, we pass the increase in copper price directly to the customers.
What is the market share of Ducab in the UAE?
Three quarters of our sales are in the Emirates. We always try to increase our sales outside the country, but the demand here is high and we are keen to serve our local customers first. We estimate that we have a 30 per cent market share in the UAE.
What is the estimated demand?
Demand has increased massively in the past three years and we expect this strong demand to continue, as there are so many projects in the pipeline. It is estimated that projects worth $1 trillion [Dh3.67trn] have been already announced in the GCC countries and we expect more to come up.
What are the new cable products offered by Ducab?
We are launching new fire-resistant cables known as the Ducab FR range. In case of a fire, this product will help save lives and provide protection to sensitive equipment, as it can resist fire for three hours.
How is the cable industry doing in the region? What figures have you gathered about the sector?
The region is experiencing strong demand for power cables. The sheer size of mega projects currently under way – such as the King Abdullah Economic City in Saudi Arabia, Kuwait’s Silk City, Yas Island in Abu Dhabi and Dubailand – would require manufacturers like us to invest in additional capacity to supply the right cable types on time.
The Gulf real estate surge – estimated at more than $1.006trn – has created demand for power cables and this will continue for a considerable time period. However, Ducab’s current developments and the plans of our competitors will enable the industry to meet this demand. As Ducab is the leading manufacturer of high-quality power cables and wires in the Middle East, it will strive towards maintaining a high share of the power cable market.
How did Ducab fare in 2007 and what were the sales figures?
Last year was a very significant one for us with more than 50 per cent growth in sales compared to 2006. The two factories in Dubai and Abu Dhabi jointly produced in excess of 125,000 tonnes of cable, and the company exceeded the 2007 year-end target of Dh2.2bn in revenues by a significant margin.
PROFILE: Andrew Shaw, Managing Director of Dubai Cable Company (Ducab)
A native of the United Kingdom, Andrew Shaw brings with him 10 years of expertise in the power cable industry. He is a graduate of Imperial College London and has an MBA from London Business School.
Shaw’s most recent assignment was in China as CEO for Italian multinational Prysmian Cables and Systems’ Chinese operations. Prior to this, he was managing director of Prysmian’s affiliate in Malaysia, based in Kuala Lumpur. He has extensive international experience, having worked in Thailand, the UK and South Korea in a variety of positions.
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