Production expectations of metal products manufacturers up for 2008
The Business Expectation Survey 2007 conducted by the Dubai Chamber in the third quarter of the year showed an increasing production prospect of metal product manufacturers, with 68% expecting higher production in the second semester of 2007 compared to their actual production in the first semester of the year while none expected a downturn for a net positive expectation of 68% (Table 1). For the first semester of 2008, 75% expected production to go up. However, 7% expected a downturn, leading to the same net positive expectation score of 68%.
The industry showed a highly domestic orientation, with more than 70% of production sold to the domestic market. Expectation for sales in the domestic market was likewise high and increasing. Table 1 also shows that 69% of respondents expected sales to go up in the second semester of 2007, for a net positive expectation of 64 percent. Net positive score rose further by 20% in first semester of 2008 to 77%, with positive expectations rising to 79% and negative expectation declining to 2%.
Although sales to foreign markets accounted for a minor portion of total sales, it is worth noting that expectations for exports was likewise positive, though not as high as in the domestic market. Net positive score for the second semester of 2007 was 45%, resulting from 45% expecting increased exports. Export expectation for the first semester of 2008 was significantly positive at 65%; thus, despite the 4% with negative expectation, net expectation posted a 36% semestral increase to reach 61%.
Expectations for critical inputs
Manufacturing technology is continually changing with rapid advancements in technology. This is especially true for metal product manufacturing; making technical capacity an important determinant of the industry’s capacity for growth. As seen in Fig. 1, most (75%) of the respondents had sufficient technical capacity for their first semester production activities, while 23% had insufficient capacity. Although the responses reflected a relatively high degree of sufficiency, the expectations for increased productions and sales suggested an immediate need to expand the industry’s technical capacity. As of the first semester of 2007, only 2% reported excess technical capacity.
Consistent with the above, Table 2 shows that for the second semester of 2007, 57% of respondents expected increased capacity utilization, while only 2% expected the opposite, leading to a net positive expectation score of 55%. Expectation for increases went up to 71% for the first semester of 2008, significantly nullifying the pessimistic view of 4% of the respondents to register a net positive expectation of 67% for the semester.
As shown in Table 2, the expected increases in production could be attributed to increasing employment, especially of skilled personnel. A large number of respondents (83%) expected wages in the second semester of 2007 to be higher than the previous semester’s wages, and this was expected to continue to the first semester of 2008, with 88% having the same expectation for the semester.
Expected wage increases do not necessarily imply increasing personnel, as the rising cost of living in Dubai put pressure on companies to increase the salaries and wages of personnel. However, the growing positive expectation for improvement in the availability of skilled personnel suggested that the expected wage increases could be partly attributed to upgrading the technical capacity of workers. From a negative net expectation of 9% in the second semester of 2007, net expectation score for availability of skilled personnel turned positive for the first semester of 2008 (5%).
Dubai’s metal manufacturing industry is one of the strongest subsectors of the emirate’s manufacturing sector, supported by the rapid expansion of the real estate sector of Dubai and the UAE. This position is expected to continue with the growing demand for metal products in the domestic and regional markets as expansion of the real estate sector in the region continues. The survey pointed out the industry’s capacity to meet the current demand. However, it also showed the need to improve the industry’s capacity for growth to move along with increasing demand.
