Focus: Construction

More on Materials

More on Materials

May. 5, 2013

Azerbaijan's booming construction industry will see large infrastructure projects and new building materials facilities coming onstream in 2013.

In total, AZN15.3 billion was invested in the construction of complexes in 2012, marking 18% growth compared to the 2011 figure. Meanwhile, investments for assembly work grew 17.5% to AZN9.3 billion, and AZN6.6 billion was allocated toward the construction of production facilities in 2012, an increase of 43.4% year-on-year.

These investments led to the establishment of a number of social infrastructure and residential projects. In addition, 1.7 million sqm of housing space and 996 new beds in clinics and other ambulatory institutes were built nationwide. While 47,468 places were created in newly built secondary schools, double the number added in 2011, 1,115 new spaces were added in Azerbaijani pre-schools, a figure that grew more than 54% year on year. The authorities issued 1,249 licenses for real estate activities, 555 for industrial construction, 13 for trade and transport projects, and seven for agriculture development in 2011.

As one of the main elements of the non-oil sector of the economy, the construction sector represents 8.2% of the valued-added in Azerbaijan's total GDP. As of end-2011, 78,600 people were employed in the sector, up 15% from the 68,000 recorded in 2010.

Having completed the construction of a Metal Constructions Plant, the Crystal Hall Sport-Concert Complex, and five-star hotels in Baku, the nation's capital saw especially high levels of activity in 2012. However, the completion of energy and industry projects such as the hydroelectric power stations in Gusar and Fuzuli and the milk-processing plant in Tartar demonstrated the increased level of development in the regions of Azerbaijan as well. Furthermore, in order to reinforce the country's hosting of the first European Olympic Games in 2015, new sports complexes were built in Astara and Barda.

BUILDING MATERIALS

The cement industry continues to spearhead the building materials segment, despite setbacks in 2009. The production of limestone and aluminum is also growing in importance. The launch of operations at new and refurbished materials factories is expected to push the industry further in 2013 and beyond.

Cement production has shown steady growth over the past three years, with an 11.5% increase from 1.3 million tons in 2010 to 1.4 million tons in 2011. Cement production grew again to 1.7 million tons in 2012, registering a growth figure of 21%.

Leading the industry is Holcim Azerbaijan, which specializes in dry-process cement production at its plant in Garadagh. The plant was modernized and re-inaugurated in July 2012 after an investment of approximately €330,000. The project is considered beneficial in terms of its low fuel consumption and negligible environmental impact. In addition, the factory has the capacity to produce 1.7 million tons annually, which will meet rising demand in 2013. Furthermore, Holcim Azerbaijan “creates jobs for more than 2,000 people along the value chain. Aiming to be the employer of choice, “we create a safe work environment, devote ourselves to career development, and provide an adequate balance between our workers' professional and personal lives," Raoul Waldburger, CEO of the company, told TBY. The company has invested more than $6 million in the professional development of its employees since it arrived in the country in 1999.

However, Holcim Azerbaijan is not the only cement producer on the scene, with Norm and Akkord also involved in projects that will boost cement production capacity and pump up the construction sector at large. Norm is currently working on the establishment of a new cement plant along the Baku-Tbilisi-Ceyhan (BTC) pipeline, which will feature 2 million tons of cement capacity and will be the largest cement hub in the Caucasus. The facility is designed to produce oil-well cement, which will be key in the development of the local energy sector. In Western Azerbaijan, Akkord is moving on to the construction of the Gazakh Cement Plant, with feasibility studies already completed by Deloitte. “This plant, with a prospective 3 million tons of cement production capacity per year, is going to satisfy 75% of domestic market needs," Khagani Guluzada, Chairman of the Board of Directors and General Director at Akkord Industry Construction Investment Corporation, explained to TBY. Once operations commence, the plant will directly employ 1,000 workers, most of them local.

Although the production of limestone declined from 542,000 tons in 2010 to 505,000 tons in 2011, prospects are improving for the coming period. With most of its investments focused on Azerbaijan, local company Matanat A is planning a significant expansion of its current facilities as well as the construction of a limestone plant in the Gazakh region. According to President Elkhan Bashirov, the project will create new jobs and increase the production of high-quality local goods. Upon completion, production at the plant will be accelerated to export goods abroad.

Local aluminum manufacturer Det.Al Holding also expects market demand for its products to increase in the coming years. “An Azerbaijani industrial group is planning on opening a new factory that will use our aluminum as their main raw material for producing cables, construction materials, and equipment," Sarkhan Babayev, General Director of Det.Al Holding, said in an interview. The company has plans to produce 50,000 additional tons of aluminum as part of Phase II of its latest expansion project for a combined capacity of 100,000 tons.

To showcase the industry, these and over 450 other companies from 31 countries participated in 18th annual Azerbaijan International Construction Exhibition, BakuBuild 2012, in October. Shattering several records, the event was the largest of its kind in the Caspian region. The large majority of participants were international exhibitors—a segment that comprised 65% of the total exhibition space—that understand the size of Azerbaijan's market and presented opportunities, latest developments, products, and services. The remaining 35% of the exhibition's floor space was reserved for domestic participants. Among the products on display at the event were building materials, lifts, escalators, tools, safety equipment, machinery, flooring, roofing, and a host of other luxury fixtures that cater to the needs of the local hotel and luxury residential space industry. The 19th edition of BakuBuild is slated to take place on October 23-26, 2013.

BIG PROJECTS

Of the most ambitious is Avesta Concern's Khazar Islands project, a $100 billion residential complex with hotels and restaurants spread across six manmade islands. With government support boosting confidence, “the construction sector has become relatively well regulated," Haji Ibrahim Nehramli, President of Avesta Concern explained. “However, I believe that Azerbaijan still needs approximately 100 million sqm of new construction projects, and for this to come to fruition, foreign investment is essential." With the rapidly expanding tourism sector and the increasing percentage of high-income residents, Avesta Concern is working toward building accommodation and entertainment for a new era of visitors.

Akkord Industry Construction Investment Corporation is another leading enterprise in the construction sector, currently engaged in five projects with a combined contract value of over AZN314 million. The company's two lines of core business are the construction of real estate and public facilities and the production and processing of construction materials.

Meanwhile, DIA Holding is working on a number social projects for the general public. In addition to its work with the Baku Flame Towers, the company is the main contractor of the Heydar Aliyev Cultural Center, which will cover an area of 100,000 sqm. “The center will house a conference hall, an auditorium, a library, a museum, and food and beverage areas," Ümit İnanç, CEO of DIA Holding, explained to TBY. DIA Holding is also involved in the Bilkent Integrated Health Center Project in Ankara, Turkey, which is expected to require a €1.1 billion investment with the support of public-private partnerships (PPPs).

Furthermore, companies such as Absheron Engineering and AzVirt are engaged in large-scale infrastructure projects involving the transportation and storage of oil and gas resources and the establishment or expansion of new airports, roads, and railways. Key transport links such as these will play a vital role in the next stage of Azerbaijan's development, as well as maintain the construction sector as a healthy part of its growing economy.

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