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Editor’s
Desk
Time to tame
Burj Dubai, the iconic tower being developed by Emaar Properties
PJSC, has reached a new record height of 688 m (2,257.2 ft).
The tower became the world’s tallest after surpassing
North Dakota, USA’s KVLY-TV mast (628.8 m; 2,063 ft)
in April 2008. Currently at over 160 storeys, the tower also
has the largest number of floors in any building.
But the Burj is not the only one rising. The per-capita consumption
of steel in the GCC has risen to a record 387 kg in 2007,
which was more than double the world average per-capita consumption
of 182 kg. Demand in the UAE has risen as high as 440 kg per
capita, which made the region the largest per-capita steel
consumer. Consumption of steel in the Middle East is growing
at a phenomenal rate. By 2010 the region is expected to consume
60 million tonne a year, while expected to only produce 35
million tonne per year.
The Gulf has remained quite well hedged against rising metal
prices due to the rise in oil prices. The London-based Centre
for Global Energy Studies forecast that combined earnings
of the six Gulf countries will rise to $ 562 billion (Dh 2.06
trillion) this year with the UAE reaching $ 97 billion, up
67 per cent year over year, and Saudi Arabia reaching $ 307
billion, up 75 per cent year over year. Last year, the GCC’s
income was $ 328 billion, and in 2003 its income was $ 137
billion. In 1998, with oil at $ 10 to $ 12 per barrel, the
GCC’s income was about $ 56 billion.
Yet, building costs are hurting. Saudi Arabia is already
trying to tame the steel prices in its local market and prices
are being slashed by SR 200 per tonne effective from September
1, according to a statement by Al-Ittifaq Iron in a letter
to local iron distributors. Qatar is facing another unique
problem where cement is in great shortage and as a Qatar Chamber
of Commerce official revealed that it (cement) is finding
its way into the black market. He stated that it can be found
in the black market at prices four or five times higher than
the fixed price. For instance, a bag that costs QR 12 would
fetch QR 65. However, as regards steel he revealed that in
Qatar there was no shortage of steel and was the world’s
cheapest. It is reported that steel is being sold in other
GCC neighbouring countries at QR 5, 000 per metric tonne while
in Qatar 16 mm to 40 mm steel is sold at QR 3,200 per metric
tonne. Qatar is not the only one feeling the black market
impact. A black market for cement, where prices hover upto
60 per cent above the price ceiling fixed by the government,
is thriving in the UAE on the back of an acute supply shortfall
and rampant hoarding activities. The UAE’s Ministry
of Economy has set the price ceiling for cement at Dh 295
per tonne and Dh 17-18 per 50 kg in June 2007 as escalating
costs of construction materials — mostly steel and cement
— threatened to impact the booming construction sector.
Reportedly while most cement factories in the UAE abide by
the official price cap, some leading building materials traders
take undue advantage of the supply shortfall to charge up
to Dh 29 per 50-kilo bag for Ordinary Portland Cement through
mostly under-the-table transactions for which no proper cash
bills are issued. However, some industry sources said certain
cement suppliers are demanding more than Dh 400 per tonne
as a result of a steep rise in clinker, diesel and manufacturing
costs. In a move to tackle the worsening supply crisis, 41
cement manufacturers and distributors met in Abu Dhabi to
reiterate their commitment with the Ministry of Economy to
sell cement at Dh18 per bag at stores within the city limits.
The cement industry has also committed to increase its daily
production from 150,000 bags to 250,000.
The building material prices fire is spreading into unlawful
territories and it is time the government cracked its whip
and tamed it to keep the growth engine on track.
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