MEED market analysis predicts impact from Euro financial crisis will impact construction market
Qatar’s construction programme could face “cost overruns and massive delays”, due to the European financial crisis and regional supply issues, according to a Tender Price Index (TPI) forecast.
Considering more than 200 tender documents during a three year study, TPI authors MEED created a formula by simulating population growth against GDP to identify correlations with tender prices.
“We are looking at all the project announcements, many of which are government driven, and the indication is that we will see a 17 – 18% increase in costs,” MEED general manager Emil Radameyer told The Big Project.
“That 18% is conservative – it could be much higher,” he continued.
Simulations were also made for materials. A cement deficit of 3 million tonnes per annum (MTA) is likely by 2015, considering Qatar’s current production capacity of 6MTA.
“We have highlighted the pit falls and it’s reasonably early enough for people to take action. Unless they secure supply at a reasonable market rate there will be delays and cost over runs. The powers that be need to take action,” Radameyer warned.
It’s not all bad news – the void left by Qatar’s under capacity could pave the way for other regional companies to supply the market. However, if the financial situation remains unchanged in Europe liquidity could be affected, hindering private sector access to the market.
“With the European crisis worsening, it could have a negative impact on investments and the private sector will not get involved in the construction boom in Qatar,” Radameyer added.
The research is released only days ahead of the IOC’s announcement of potential 2020 Olympic hosts, with Qatar one of the countries hoping to make the shortlist. The final announcement will be made in 2013.
“Qatar cannot wait until that final announcement is made before they start to move on projects; they cannot afford massive delays on this,” Radameyer commented.
MEED previously applied the same model to the UAE and currently has a team analysing Saudi Arabia.