New projects will create more demand
Construction costs in Qatar are expected to increase by 18 per cent by 2017 as Doha starts work on projects as it prepares to host the 2022 Fifa World Cup.
According to the Tender Price Index (TPI) for Qatar prepared by MEED Cost Indices, construction costs in 2017 will be 18 per cent higher than they are in 2012. Next year the index predicts that costs will be 4 per cent higher as work starts on major new infrastructure projects such as the Doha Metro scheme, that are currently being tendered. Overall, the index forecasts that over $15bn worth of construction contracts will be awarded in Qatar this year.
The value of contract awards is set to more than double from 2013 onwards, and is forecast to peak in 2017 at $40bn. The rapid increase in awards and the resulting construction work on site will strain the Qatar’s supply chain to breaking point.
With limited domestic production of construction materials and a dependence on foreign workers and staff, most resources are expected to be in short supply, driving up costs. Shortages are expected for resources such as cement, rebar, steel, skilled and unskilled labour.
For cement, Qatar is expected to have a shortfall of cement reaching almost 3 million tonnes a year in 2015. The current production capacity of 6.2 million tonnes per annum will render a small surplus during 2012 and acute shortages form 2013 onwards. With current trading conditions allowing only Qatar cement producers to import cement, a possible duopoly could result in significant cost increases or project delays.
The most likely sources of cement will be suppliers in the northern emirates of the UAE, which all have large surplus capacities as a result of heavy investments made during the UAE’s construction boom.
Doha’s port facilities are also expected to drive up costs. The existing port has a limited capacity, which means that contractors have had to wait for imports coming through the port.
A new port, which is currently being built at Mesaieed is expected to alleviate the bottleneck, but it is not expected to start operations until 2016.
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