UAE steel demand to grow 4%

Sharjah: Steel consumption in the UAE is expected to grow 4 per cent this year to 6.6 million tonnes as oil and gas projects raise demand for steel, industry insiders said yesterday at the SteelFab Exhibition in Sharjah.

Steel consumption is expected to grow 5 per cent to 6 per cent in the Middle East this year, led by Saudi Arabia and the UAE, with planned and progressing projects in the GCC valued at $2.96 trillion (Dh10.88 trillion), said Saadath Thajudeen, head of business activities at Al Ghurair Iron and Steel.

In the Middle East, the oil and gas industry accounts for 30 per cent of the projects, according to the exhibition organisers.

Infrastructure projects in shipbuilding, pre-engineered buildings, pipelines, power plants, water treatment facilities, airports, rail projects and sports complexes are also driving demand, said Sanjeev Tyagi, Head of Business Development of India-based Essar Steel Middle East.

The UAE awarded $39 billion in contracts last year in energy, infrastructure, and buildings, according to business advisory Venture Middle East. The contracts for the GCC were valued at $148 billion.

With this flurry of development, Middle East steel demand is set to see an 11.9 per cent increase in CAGR in the next 10 years, Thajudeen said.

Growing gap

But there is a growing gap between production and consumption, he added.

By 2013, the region will witness a shortage of 6.9 million metric tonnes of crude steel and 14.2 million tonnes of finished steel, according to Metal Bulletin Research.

The shortage, combined with planned projects, provides growth opportunities for steelmakers and exporters focusing on the region, Thajudeen said.

In the GCC, steel market boosters include the UAE's nuclear and renewable energy plans, said Marcel Schmitz, head of sales and marketing at Abu Dhabi Metal Pipes and Profiles Industries Complex.

Steel prices are expected to increase in the next three months from their current $740 to over $800 due to rising iron ore prices and global demand but will soften in April or May, he said.

Still, the industry must steel itself for challenging times ahead as it faces market volatility, production overcapacity, dumping by Asian countries, the real estate slump and lack of financing, Schmitz said.

Rising utility costs are forcing producers to protect their profit margins but it is difficult to pass on the increase to the customers, he added.

"This market is fragile at the moment, the government should be available to talk."

Local business is currently slow and steelmakers have to rely on export markets, Schmitz said.

Meanwhile, clients are buying on demand rather than piling up their stocks, making it difficult to do business, he said.

There may be a "false dawn" on demand for steel in the UAE, he said. This is due to the recession aftershocks, growing production overcapacity, China and US failure to stabilise their domestic markets, market speculation without monitoring, and heavy industries failing to recover from debts, which slows the demand of steel and oil consumption.

Capacity to be doubled

India aims to double its steel production capacity to 150 million tonnes by 2020 and targeting the Middle East as a nearby and lucrative market, said Sanjeev Tyagi of the India-based Essar Steel Middle East. The UAE imports 8-10 per cent of its steel from India, he said. Essar is planning to boost Middle East sales to 1 million tonnes by year end. In November, Essar opened a service centre in Jebel Ali and is planning a "steel hypermarket", he said. Meanwhile, local steelmakers call on the government to protect the industry by applying anti-dumping measures and providing export rebates, representatives said at the exhibition. "The UAE is very much vulnerable to dumping. For foreign mills this is a dumping region," said Saadath Thajudeen of Al Ghurair Iron and Steel.