Demand for building materials expected to rise amid UAE construction boom

Emirates Steel Arkan expects up to 10% growth in sales this year

Hugo Losada, chief executive of building materials at Emirates Steel Arkan, says the division contributes 20 per cent to 25 per cent of overall profit. Chris Whiteoak / The National

Demand for building materials is expected to continue rising in the UAE amid a construction boom and the launch of new projects by property developers, a senior executive has said.

Dubai is constructing a new terminal at Al Maktoum Airport with a total investment of Dh128 billion ($34.8 billion) to expand its capacity to 260 million passengers. Developers including Emaar Properties have announced projects near the area in anticipation of higher demand from buyers.

Developers have also unveiled new projects across other parts of the Emirates as demand for property continues to rise amid a rise in prices.

“The new terminal airport in Dubai … all the developments in Abu Dhabi are showing quite healthy demand. We expect that demand to grow for the foreseeable future,” said Hugo Losada, chief executive of building materials at Emirates Steel Arkan.

He was speaking to The National on the sidelines of the Make it in the Emirates forum that concluded in Abu Dhabi on Tuesday.

Emirates Steel Arkan sold Dh1 billion worth of building materials in the UAE last year and expects a 5 per cent to 10 per cent growth in sales in 2024 amid the construction of new projects, Mr Losada said.

“We expect single-digit growth in sales because of the construction boom that’s happening.”

Listed on the Abu Dhabi Securities Exchange, Emirates Steel Arkan is the largest public steel and building materials business in the UAE.

The company produces steel, cement and concrete blocks, as well as PVC pipes used in the construction industry.

It was formed after the merger of Emirates Steel and Arkan Building Materials in 2021.

The building materials division contributes 20 per cent to 25 per cent of the overall profit of Emirates Steel Arkan and 10 per cent to 15 per cent towards its overall revenue, Mr Losada said.

Emirates Steel Arkan recorded a net profit of Dh601.9 million last year, while its revenue touched Dh8.9 billion.

Meanwhile, the building materials division recorded a revenue of Dh871 million last year, with profit hitting Dh145 million.

Outside of the UAE, the company exports building materials to countries such as Bangladesh and Sri Lanka.

It owns the biggest cement factory in the country, located in Al Ain, with a capacity of 4.6 million tonnes. Emirates Steel Arkan also has plants in Abu Dhabi for the manufacture of pipes and concrete blocks.

The company is contributing to the Make it in the Emirates initiative as well as Operation 300bn, which aims to position the country as an industrial centre by 2031, Mr Losada said.

“We have a very high level of in-country value because the raw materials are mainly sourced locally, in terms of cement, in terms of blocks,” he said.

Operation 300bn, launched in 2021, focuses on increasing the industrial sector's contribution to gross domestic product to Dh300 billion by 2031, from Dh133 billion in 2021.

The UAE industrial sector’s contribution to GDP reached about Dh197 billion last year, with the country achieving 30 per cent of Operation 300bn’s target so far.

Mr Losada added Emirates Steel was playing a crucial part in Abu Dhabi's manufacturing industry, with a contribution of 11 per cent.

While the company does procure some components for pipes from abroad, it is hoping to soon start sourcing them locally.

Emirates Steel Arkan spent Dh2.4 billion in local procurement last year, up 34 per cent compared with the previous year.

The company buys scrap locally to recycle as part of its decarbonisation drive, as well as limestone and other raw materials, Mr Losada said.

By doing this, the company is also reducing emissions as the products do not need to be transported over long distances, he said.

“Local purchase by the end of the day is a win-win solution for us as well.”

Meanwhile, Dubai Industrial City, which is part of Dubai-listed Tecom Group, attracted investments worth Dh2.8 billion in the last 18 months as the UAE continues to focus on the growth of the industrial sector and attract more investment into the country.

The industrial zone attracted investments in sectors including food and beverages, building materials, transport and machinery equipment, Saud Alshawareb, executive vice president of industry at the Tecom Group, told The National.

“The ecosystem that we provide – the ease of doing business, being close to one of the busiest ports in the world, which is Jebel Ali port”, as well as Al Maktoum airport – helps companies to boost exports because of better connectivity, he said.

The new comprehensive economic partnership agreements signed by the UAE with different countries including India, Turkey and Indonesia also help companies to export “Made in UAE” products to different markets at competitive prices, he said.

The UAE has signed 10 Cepas so far with countries in Asia, Africa and Latin America.

Dubai Industrial City also bought 13.9 million square feet of new land from Dubai Holding Asset Management for Dh410 million amid higher demand.

“This was mainly because of last quarter, the inventory of land that we had, occupancy wise had reached 97 per cent,” Mr Alshawareb said.

“So, this was an immediate reaction from our side to launch that 13.9 million to cater to the demand of the industrial companies that are willing to expand and grow within Dubai.”

There are currently more than 300 operational factories in Dubai Industrial City, with more than 1,000 business partners using its facilities.