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Middle East cables market to exceed $9bn by 2020

Expansion of power infrastructure will be a boon for suppliers, Frost & Sullivan report says.

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Power cables, News

Significant opportunities are on the horizon for cable manufacturers in the Middle East thanks to the rapid economic expansion being witnessed in the region, according to a new report by Frost & Sullivan.

The market has witnessed dramatic growth over the past decade as GCC countries continue to integrate their power grids, and revenues are expected to rise by over 50% to $9.22bn in 2020 from $5.81bn last year, it says.

And that uptrend is expected to continue as fast developing countries including the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA) and Iraq plan to spend significantly on the power sector, it adds.

With the private sector’s contribution to power generation expected to grow from 7.4% to over 17% by 2020, the KSA alone will account for an investment of around $100bn.

“The Gulf Cooperation Council (GCC) interconnection power grid project, which has been drawing huge investments from all participating countries, will drive the need for power cables,” says Frost & Sullivan Energy & Environmental Consultant Mohammed Faraz Khan.

“The first phase of the project has brought in a capital of around $1.1bn, indicating its potential to rejuvenate the Middle East power cables market.”

The expected boom in infrastructure and construction projects over the next decade with several GCC countries preparing for landmark events such as the 2022 FIFA World Cup in Qatar and the 2020 Expo in UAE brightens the outlook for power cable manufacturers, the report says.

With copper prices anticipated to continue to drop over the next two years, end-user industries in the region will be in a better position to demand superior discounts and purchase power cables.

However, the Oman and Bahrain power cable markets will not expand as quickly as the UAE and Qatar markets due to the lack of large-scale infrastructure development plans. Kuwait too will experience only moderate growth on account of delays in awarding long-pending projects.

Further, the Organisation of the Petroleum Exporting Countries’ restrictions on oil output have led to surplus production capacity in the KSA, discouraging investment in the short term and adversely impacting the power cables market.

While recent sanctions on Iran have created an oil supply gap, countries like the KSA have agreed to fill it, thus suppressing the need for power cables and other associated equipment. Along with these market dynamics, the limited success that the KSA has witnessed in the exploration of urgently-required non-associated natural gas to fuel power generation and for use as a feedstock in petrochemical plants has dampened market prospects.

“Competition in the Middle East power cables market has intensified and tier II and tier III suppliers have instigated price challenges,” noted Khan. “To rise above these competitive pressures, power cable suppliers should adopt best practices to improve production efficiencies and achieve economies of scale to reduce manufacturing costs and maintain profit margins.”

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