The Middle East crane market is down overall but there are areas of growth
By Euan Youdale15 February 2010
The high level of construction activity in the Middle East has cooled in the past year, particularly in Dubai. However, activity is picking up in other areas of the region.
Chief executive of contractor and project developer Leighton Holdings, Wal King, said that although later to arrive, the global financial crisis has made an impact in the Middle East. King says projects worth US$ 500 billion, predominantly in Dubai, have been put on hold since the global financial crisis began, which he attributes to private funding difficulties and reduced commercial viability.
Wolfgang Beringer at Liebherr-Werk Ehingen agrees. "In Dubai, in the medium term, construction projects will decrease. Banks are very restrictive in giving loans. So, fewer cranes are purchased and many cranes are already in the market."
According to David Semple, Manitowoc Middle East sales director and general manager, the demand for cranes is now coming from elsewhere in the region. "The real estate bubble burst in Dubai back in December 2008, so it's been over a year. We do not expect major activity to return to Dubai in the near future."
Semple adds that other parts of the region face a similar situation. "The countries and cities where growth was mostly fuelled by real estate, Dubai and the Northern Emirates of the UAE, Qatar, Kuwait, Bahrain, are very quiet now.
Crane rental company Al Faris Equipment Rentals works mainly in the United Arab Emirates, although carries out some projects in Oman.
At the end of 2008 it took delivery of a new 600 tonne capacity Liebherr LR 1600/2 lattice boom crawler crane, which will be put to work on construction sites of nuclear power stations in Abu Dhabi.
The Dh73.47 billion ($20 billion) award for four plants to be built by 2020 will supply up to a quarter of the emirate's energy.
Brian Green, Al Faris heavy crane manager, explains that the new machine will complement a 400 tonne capacity crawler that is continuously working on new oil and gas projects in Abu Dhabi.
It is hoped these projects will pave the way for significant infrastructure and building projects.
The situation in Abu Dhabi is a welcome contrast from Dubai and is seen as a beacon of hope for the crane industry in the UAE. Not least for Al Faris, which has seen business drop by about 50%, and that is a conservative estimate, says Green.
"We have cranes in the yard now, compared to eight months ago when we did not have any in the yard. 2010 will be a year when we all have to tighten our belts and be careful what we spend money on."
Al Faris has a 500 tonne capacity crawler following in February but recently put a couple of other orders from Liebherr on temporary hold. Despite the lack of work Green argues that fleets should develop with the times.
"If you don't have the [right] cranes you will not be in the running for big projects in the future. Now we have time to do extra maintenance on the cranes that we have and get ready.
Abu Dhabi promise
Wal King describes Abu Dhabi as the most promising market in the Middle East. An example of this is the $490 million contract that the Al Habtoor Leighton Group won in July 2009 to construct offshore port facilities at the Khalifa Port and Industrial Zone.
The project includes the construction of 47 buildings and associated infrastructure, including road networks, bridges, utility installations and landscaping.
Another market seeing positive growth in the region is Saudi Arabia. "In our experience, Qatar and Saudi Arabia are notably busy because of oil and gas developments, which are still the main influence in the Middle East in terms of driving industries," comments Nick Latham, chairman of UK-based specialist crane rigging and engineering company Modulift.
This experience is shared by fellow manufacturer Liebherr. "In Saudi Arabia the situation is stable. There are many planned and pending projects, which will be realised, if the world economy develops positively," says Wolfgang Beringer.
"On the other hand, there are already many cranes in the market," he adds
Manitowoc is similarly enthusiastic. "The government authorities in Saudi Arabia have embarked on the Kingdom's most ambitious infrastructure programme in its history, incorporating educational facilities, transport systems, new industrial zones and oil and gas developments. We also observe more interest in the housing and commercial space markets."
As far as future markets are concerned, Iraq is also beginning to raise its head above the sand. Latham explains that as the political landscape improves and security heightens, redevelopment of its oil industry will follow.
"New agreements with leading oil companies worldwide are being signed in Qatar and, most notably, Iraq," he adds. The need for residential construction in Iraq stands in stark contrast to the overdevelopment in Dubai. "We see a positive development in Iraq, and also Jordan," says Beringer.
Liebherr has had a service subsidiary in Iraq for almost 30 years and recently purchased land to expand its presence there.
"Even during the very difficult times the subsidiary was working with local staff and maintained service and contacts. From time to time we would sell equipment to Iraq.
Liebherr sells its cranes in Iraq through a representative based in Jordan. "The problem for us is that it is still too dangerous to travel in the country. So we work with local staff, and by phone, e-mail, etc."
Semple expands on the point. "After almost 20 years of difficulties, the housing and infrastructure needs are huge, and the situation is slowly improving. We are particularly optimistic about the needs for mobile cranes."
As far as rental companies are concerned, they should approach politically charged states with caution, warns Green.
"Iraq has more potential now and, although we are very close to Iran, we do not want to get into that area. We don't want to take equipment over there and then not get it back, as other companies have experienced."
Jordan also appears to hold a future for rental companies working outside the country. Al Faris will send its new LR 1600/2 crawler there in January for maintenance and shut down work at a refinery.
The 40-day project will include four vessel lifts of between 175 and 185 tonnes each
Heavy lift trend
When it comes to lifting trends, the Middle East shares a common experience with many parts of the world.
Nick Latham says, "Changes in design techniques of large process plants are leading to bigger module design being remotely pre-fabricated. This, in turn, is creating demand for more heavy lifting shipping, as many of the large modules are being built in the Far East."
Adding to the point, Latham explains that access limitations are driving the need for cranes with longer radius capabilities to place larger modules further away. "Development in alternate heavy lifting equipment design is being helped by the shortage of heavy lifting cranes in the world."
Semple says the rationale is also true in the tower crane market. "What we do see is a shift towards the use of heavier structural steel in high-rise construction, which drives demand towards large-capacity luffing jib tower cranes."
Over the next 12 months Semple sees a shift in spending in the region from private investment through banks, towards public spending funded by the state and oil revenue.
"The Middle East is becoming increasingly competitive as the world's manufacturers congregate to fight for the crane deals. Manitowoc is at an advantage because it has the personnel, dealer network and facilities," Semple adds.
Summing up, Scott Hazleton of financial forecaster Global Insight, reports that business and consumer sentiment in the Middle East has improved in recent months thanks to the recovery in oil prices, improving conditions in the world economy and some easing in the credit markets.
He added, however, that the slow thaw in credit markets means the recovery in 2010 is not expected to be strong.
Wal King sums up the future of the Middle East from his point of view. "I see further opportunities emerging in Qatar and new markets such as Oman, Kuwait, Bahrain and Saudi Arabia, as we further diversify the business from building to more infrastructure work.
"In the long term, the region still has vast reserves of oil and gas and these will continue to fuel construction opportunities for us as the countries of the Middle East seek to develop their economies."