Current steel prices pose major breaks for regional industry, says Danube

Published March 10th, 2010 - 08:34 GMT

The current price of steel in the UAE has seen a monthly increase from December 2009 to reach AED 2,150 per tonne in March this year - a growth pattern that is posing major prospects for the regional market in terms of its implications on the capacity of mills to operate at full capacity, according to Danube Building Materials, the leader in construction, building materials and shop fitting industries. The company further revealed that scrap prices continue to firm up, costs of raw materials steadily increase, and billet availabilty is constrained. Further price hikes are likely in the coming months, thereby prompting local steel suppliers to strongly reinforce their presence in the regional market. The steady price hike in the region, however, is not in tandem with the steep levels by which global steel prices are rising, which is a reflection that the steel market in the region is becoming indifferent to global market forces and thus continues to have a significant lag behind price surges in other parts of the world.

The price of steel in the UAE started its recent climb from a rate of AED 1,780 per tonne in November-December 2009, to AED 1,850 in January 2010, to AED 1,950 in February, and to its present rate of AED 2,150 per tonne. Comparatively, global steel (mill) prices have gone from USD 490 (December 2009) to USD 520 (January 2010) to USD 535 (February 2010) to USD 570 (March 2010), and latest estimates reveal that a price of USD 600 is imminent. The region’s indifference to the rate of increase seen in global prices is partly due to weak demand, as a result of some major projects in the Middle East being delayed or put on hold. Furthermore, liquidity in payment remains tough, with most contractors and developers unable to commit to immediate payments for suppliers in the region.

“The local steel market required up to 400,000 tonnes of steel per month in the years prior to the recession but this has reduced to 250,000 tonnes per month on account of the international economic downturn,” said Rizwan Sajan, Chairman, Danube Building Materials. “The increasing role played by GCC-based steel suppliers, which has curbed the flow of Turkish steel into the country, is also an indicator of the increasing growth potential for the regional steel industry. We remain optimistic that steel prices in the region will increase to reach its ideal level, which is somewhere around AED 2,300 - 2,400 per tonne, and this will provide a boost to the mills, which have been affected by the recession to gain full operation capacity and thereby stabilise the market.”

At present, top UAE-based suppliers Emirates Steel Mills and Qatar Steel Corporation dominate the regional supply chain, delivering a combined 175,000 tonnes of steel (125,000 tonnes and 50,000 tonnes, respectively), to the UAE. With scrap traders holding on to existing stockpiles and a lower collection of scrap over the past few months, steel prices in the region have increased at rates of close to 12 per cent in the last month. Whilst billet availability remains another issue in the region, Danube is confident that the current steel prices are a realistic reflection of the market and bode well for the remainder of the year.

“The global market has seen steel prices drop to an all-time low of USD 390 back in 2008, while prices in the region had hit the bottom price of AED 1,750 per tonne in 2009. During these periods, the steel industry has had major difficulties coping with the closure or slowing down of mills. The increase in prices we are monitoring in the UAE and the rest of the region is suggestive of positive developments in the stability of the steel industry, and we are watching for further indicators to help us leverage this excellent progress,” concluded Sajan. 

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