04 March 2008
With more than US$1 trillion of real estate projects under construction in the Middle East, getting people into and around the region is much of the focus of current infrastructure investments. Oil and gas applications are also on the rise, especially in the UAE, where expansion is forecast to continue for the next 15 years.
Liebherr's most recent full year figures, for 2006, show sales revenues for mobile cranes in the Middle East were almost double the previous year's figures. “This is attributable in particular to strong demand in Saudi Arabia. Turnover also rose significantly in the United Arab Emirates,” the company adds.
Similar numbers of new cranes are likely to be needed over the next few years forecasts Brian Green, heavy crane manager at Al Faris Equipment Rentals. “We are talking to construction companies that are looking to start projects in our area in 2010 and 2011. So the next five, six or seven years are going to be quite comfortable and we will be increasing our cranage for sure.”
Al Faris operates its cranes in the UAE and is based in Dubai, with three depots in Abu Dhabi, Sharjah and Jebel Ali. Last year the company invested €60 million (US$89 million) on cranes, including an LR 1400/2 and LR 1280 from Liebherr. Al Faris buys all terrain and crawler cranes exclusively from Liebherr and its rough terrains from Tadano. Investments for 2008 are forecast to reach €68 million (US$ 101 million).
“We very rarely go out of the UAE. Sometimes we go to Amman but have enough work here in UAE. Saudi is next door but we don't go there,” says Green.
Green adds that the utilisation of crane equipment is increasing most in the oil and gas sector on land drilling rigs where there is continuous drilling, tapping and moving work involving Al Faris machines. Indeed, the company says 70% of its work is based in the sector, with the remaining 30% being made up from construction and general taxi work.
Oil and gas
The range of projects relies on versatile machines that can be used across the board, including construction sites. According to Green, the 200 tonne capacity Liebherr LTM fits into that category and is the most used model in the fleet. Al Faris has 11 of them on order for 2008.
“Oil and gas will expand now for the next 15 years. We are talking about projects in 2010 and 2011 that are starting from scratch, with complete units being built,” says Green.
He adds that Abu Dhabi is seeing some of the biggest expansion in the region, with increasing oil and gas facilities. Large-scale accommodation projects are also planned in Abu Dhabi city, although construction work currently pales in comparison to the oil and gas sector. “In Dubai it is mostly construction but, in Abu Dhabi, it is more diverse, with oil and gas being number one,” comments Green.
Abu Dhabi, along with fellow Emirates, Sharjah and Ras Al Khaimah, is making economic reforms to attract foreign investment. It is also investigating an inner-city train network and metro lines under its Plan Abu Dhabi 2030. This will see its transport network expand to accommodate the Emirate's population growth, which is forecast to total three million by then. A new network is also expected to link Abu Dhabi to the east coast and, eventually, to a proposed GCC (Gulf Cooperation Council) wide railway network.
Leading the way in the transportation segment is Dubai, with its new metro system. “Where else would you get two lines, with over 70 km of track and 40-plus stations all being built at the same time? In any other country it would be phase one, followed by phase two and so on,” says Paul Abbosh, Atkins director Dubai Metro Project.
Alternative lifting and specialized transport company TTS, with offices in Dubai and Abu Dhabi, is working on the metro project. It is using its hydraulic gantries to install 90 tonne pier caps.
Eric Van Sabben, TTS international business development manager, says cranes are often restricted from carrying out this type of work due to overhead power cables, bridges and viaducts.
TTS currently has one crawler crane, a 150 tonne capacity Manitowoc M4000, with the bulk of its lifting work carried out using hydraulic gantries, winches and strand jacks. Some 70% of business comes from the specialized transport system.
The TTS fleet includes a 50 tonne capacity Favco M65D tower crane, erected at the top of tall buildings to raise alternative lifting equipment. One of the company's contracts involved lifting sail panels 320 m to the top of the iconic Burj Al Arab hotel in Dubai, using two winches.
Van Sabben comments that although oil and gas remains an important aspect of Dubai's economy, the expansion of the ENOC refinery being an example, the focus is slowly shifting towards big business.
This, he says, is evident in the expansion of sea ports Jebel Ali and Port Rashid, the new Jebel Ali airport, set to become the world's largest, along with economic free zones and the rapid expansion of Dubai City.
In 2007 Manitowoc unveiled a new sales and service facility in Dubai. The 1,400 m2 facility in the Jebel Free Zone also houses a workshop, parts warehouse and a training centre.
“The operations here have quickly evolved from several one-man outfits to a central office with over 30 employees. By combining these resources we are able to more effectively and efficiently serve our customers throughout the region,” explains David Semple, Manitowoc sales director and general manager.
Saudi Arabia, the Middle East's oil leader, is expected to see a 3% drop in oil output in 2007, says Scott Hazelton at Global Insight. “However, the non-oil sector is more than primed to compensate in construction activity.”
Hazelton adds that several large-scale ‘economic cities' are under construction to provide residential and commercial units for a population up to 100,000 people. Steady growth of oil revenues has boosted the fiscal confidence of the Saudi government and fiscal spending is on the rise, comments Hazelton.
The Saudi government has launched a US$ 624 billion investment programme for the next 15 years, of which US$ 140 billion is for infrastructure.
According to Christian Schorr-Golsong, Terex Demag marketing director, the crane market in Saudi Arabia reflects the promised government investment. He says about 80 Terex Demag all terrains were sold in Saudi in 2006, with a similar figure in 2007. That is expected to increase to 90 machines in 2008.
“Use of the machines is to a high degree on repair and maintenance work in refineries which keeps the crane population busy. For large crawlers the market is very busy as well for the set up of crackers and other large items in refineries.” Schorr adds that the heavy crawler crane market there stands at about 30 per year, with Terex Demag taking a large share of that market.
According to Van Sabben at TTS, as long as oil prices remain at the current high level, around US$ 100 a barrel, the country's cash flow will remain fluid and large-scale investments will continue.
While the UAE has attracted the most attention, says Hazelton, with its signature architectural and engineering marvels, it is Kuwait that offers perhaps the surprise potential. “Strong government spending on development and infrastructure and projects will continue, with US$ 22 billion being invested in oil sector expansion alone between 2006 and 2008.”
Energy is not the focal point of construction spending, however, with large infrastructure projects, including port development, also underway or on the way.
In Iran the outlook is fraught with risk, says Hazelton. Potentially increased economic sanctions could worsen growth prospects more than currently anticipated. The current government remains dedicated to investment in infrastructure, industrial and energy projects, despite concerns over inflation and poor fiscal discipline.
“The nuclear standoff between Iran and the West has reduced foreign direct investment to only projects with short-term construction horizons and quick returns. Nevertheless, Iran's oil wealth allows for significant public financing and as along as diplomatic discussions stay on track, the construction market should expand at a strong pace, although many Western companies may find themselves unable to participate.”
The immense growth and range of applications across most of the region would be a perfect scenario for crane manufacturers and users if it were not for the universal shortage of machines.
“There is a lot of work and there will be a shortage of cranes because these guys cannot produce quickly enough. Talk to Demag, Grove, everyone is the same. Hopefully we have got the numbers right. But every week there are contracts being signed here, there and everywhere, and we will not get feedback from those tenders for the next six months or more,” comments Green at Al Faris.
Two-year lead times from western manufactures are now more-or-less standard throughout the industry and rental firms are facing delivery dates stretching into 2010. This, says Green, plays into the hands of the Chinese manufacturers, which are targeting the region.
“I think this will affect the market.
Everyone knows the quality is not 100% but these products will get better. They are in the market and will be pushing for that market. There has to be some knock-on effect for these big manufacturers because [Chinese manufacturers] tend to flood the market with cheap mobiles and crawlers. People will buy them because of the delivery times and prices.”
An example of this, adds Green, is in Dubai where most of Al Faris' work is given over to the construction and removal of tower cranes, which are, increasingly, ones built in China.
At TTS Van Sabben says demand is so high the company has been running at full capacity for the last 10 months, with no sign of the market slowing anytime soon.
Between 2006 and 2007 the company's workload increased by about 35%. “There is the demand for work to be done, then there is the amount of work that can actually be done.”
Van Sabben adds that utilisation rates for TTS' hydraulic gantries stand at 98%, while the cranes are booked out 100% of the time. Even the company's strand jacks, which are more specialized, are running at 60% utilisation.
Competition in the crane market is now so high, says Van Sabben, that TTS has deliberately focused its efforts towards alternative lifting and transport. Two 1,000 tonne capacity gantry cranes are on order, due in June, along with a supply of axle lines, due in March.
Van Sabben adds that such equipment is generally available, unlike cranes, which are difficult to find, even in the second hand market. “We feel the competition is getting higher and higher. For instance, the Chinese are coming in with their own equipment. To buy a crane is still a big investment and a fleet of 200 cranes is no exception in the UAE.”
Could sell more
Carsten von der Geest is Terex Demag UAE sales manager. The company sells to Kuwait, Qatar, UAE and Oman from its office in Dubai, while sales to Saudi Arabia are dealt with in Germany. Von der Geest says sales rose about 10% in the four states in the last year, but that figure would be higher if not for the shortage of cranes in production. “All manufacturers could sell much more if they had the cranes.” He added that if economic conditions remained stable in the region, it was likely that the standard two year delivery time for cranes could last another 10 years.
“I don't think they [lead times] will get longer. It depends on the world market, everywhere is still increasing, if somewhere drops a little, then may be lead times will get shorter in the Middle East.”
Summing up the Middle East market, Von der Geest adds, “Compared to Europe, it is more long term. There are so many projects in hand, if everything is realised then it will be good.”