Construction lead
Construction is ongoing at the Expo 2020 Dubai site Image Credit: Gulf News archives

As Expo 2020 Dubai approaches, the outlook for the construction market and its allied sectors has brightened considerably following a recent period of uncertainty. With the momentum looks set to continue following the world fair with continued progress on several major projects across the region, the market for construction equipment and heavy machinery has also improved.

“Order booking at this point is not bad,” says Sunil Shetty, Sales Manager at United Motors and Heavy Equipment, tells GN Focus. “But the outlook for the future looks better with the expectation of three major projects such as the Al Maktoum Airport expansion, Etihad Rail phase II and the Hail and Ghasha islands projects. They will definitely trigger the demand for new equipment in the market.” United is the regional dealer for construction equipment brands Sany, Bell, Airman, Astec and Man trucks and buses. “These projects will continue well beyond Expo 2020.”

Cautious optimism

The dealer is among several industry players to launch market-responsive solutions in the UAE. Other OEMs such as Volvo, Alimak, Linden Comansa and Komatsu also recently debuted new machinery, many at this year’s Big 5 exhibitions.

The moves are in line with global trends that have pushed the construction equipment manufacturers to broaden a range of more than 100 different machine types, McKinsey said in a recent report urging OEMs to act urgently and decisively by making strategic choices and taking concrete action to bring about visible change in the daily business. “Many potentially disruptive changes could come faster than anticipated,” said the consultancy’s report. “But there is a healthy optimism among industry players about what lies ahead. OEMs see opportunities both to grow and to increase margins. [A] move from an operations-focused perspective to a customer-centric one is a major step in the right direction.”

Companies will need to adapt to take advantage of the opportunities presented in projects across the UAE, where smart, sustainable demands are now the norm.

Over the short term, Expo 2020 will provide the biggest impetus. In terms of sheer numbers, more than Dh11 billion worth of venue-related construction contracts awarded in 2017 alone, and a fresh raft of jobs have been awarded in the last few months, such as the Dh630-million ($171-million) infrastructure contract by Dubai’s Roads and Transport Authority in October. The top ten active projects linked to the event are worth nearly Dh120 billion, according to data from project intelligence provider BNC Network. The total value of all major expo-related construction activities in Dubai totals up to an estimated Dh156 billion, the report says.

Avin Gidwani, CEO of BNC Network, says, “As evident from the hectic construction activities, Expo 2020 projects have kept Dubai’s construction sector busy, which have a knock-on positive impact on the overall economy. This in turn will help the economy and [keep] consumption stable.”

Leading the list at Dh29.3 billion is the expansion of the first phase of the Al Maktoum International Airport. With a design capacity to handle 160 million passengers a year, the aerotropolis spans 140 sq. km. Although Expo 2020 is widely seen as an engine of growth, other projects around the country are also being revived and are expected to keep the momentum going across the sector.

Last month, the UAE’s Barakah Nuclear Energy Plant announced the completion of all concrete works and heavy equipment lifting for its four nuclear reactor units. The move was described as a historic milestone for the Arab world and underscored the commitment to development that has underpinned the nation’s economic growth.

Also in November, the UAE government agreed financing for the second phase of the Dh40-billion Etihad Rail project. The new line will connect Fujairah on the east coast with Ghuwaifat on the border with Saudi Arabia, 605km away.

Meanwhile players in the energy infrastructure space will benefit from the Abu Dhabi

National Oil Company’s decision to explore a potential Dh73.46 billion investment to develop up to 11 gas fields as the emirate seeks to enhance its hydrocarbon exports. Last week, the first of a series of gas concessions was awarded for the Ghasha, Hail, Dalma and other fields. Among other projects, the sector is also watching the Dh135.9-billion Yas Island Development, where Abu Dhabi-based Miral has said it would announce at least three construction contracts soon.

Hurdles ahead

Despite the good news, there are significant challenges ahead for companies in the construction equipment and heavy

machinery business. Shetty points to three: price, oversupply and liquidity, particularly as clients look for in-house finance or long-term payment plans. Additionally, as the benefits of technological innovation such as big data and autonomous vehicles become apparent, developers will demand ever more responsive solutions.

Those hurdles notwithstanding, optimism has returned to the market, as we saw in March, when the standalone Big 5 Heavy exhibition recorded $2.5 million in deals at the Dubai World Trade Centre. Growth may be more nuanced, but the momentum looks set to continue