Foreseeable stability in steel markets

After a tough year, what do the trends indicate?

The United Arab Emirates has witnessed an impressive growth graph over the past few years. The nation’s economic development has been spurred by immense growth in the construction and infrastructure industry. Investors and industry players from across the world are viewing the nation as a regional economic and tourism hub.

The ext r aordina ry growth in infrastructure and construction within the last few years has augmented the local steel industry and increased its growth segments. The rising construction projects, oil-backed economies, surplus investment funds, cheap energy sources, escalating income levels and investor confidence led to immense growth in UAE, from a domestic and industrial perspective.

The recent bout of recession, like all other industries, gravely impacted the steel industry as demand slipped drastically. Add to that, price volatility and waning investor confidence led to a transient crisis. However with recovery in sight, building consumer confidence and resuscitation of stalled/delayed projects, the scenario is all set to change for good. Real estate projects predominantly in the emirates of Dubai and Abu Dhabi are set to be the driving force behind this industry. Hence, steel consumption is expected to touch 11 million tonnes by end of 2013.

Generically, the UAE steel industry is import-driven. The country imported around 8.6 and 15.2 million metric tonnes of steel in 2007 and 2008 respectively with steel imports to double by 2013. It is set to increase further as the GCC has reduced the import tariffs and the UAE enjoys a strategically ideal location (it measures equal distance from Asian, African and European countries). However, with major infrastructure and development plans on the table, domestic steel output is set to grow too.

"The United Arab Emirates has witnessed an impressive growth graph over the past few years. The nation’s economic development has been spurred by immense growth in the construction and infrastructure industry. Investors and industry players from across the world are viewing the nation as a regional economic and tourism hub."

According to the regional research conducted by RNCOS (regional industry intelligence and creative solutions provider), UAE still accounts for more than half of all GCC construction projects, with $714.9 billion worth of infrastructure and construction schemes ongoing in 2009. Many companies have started increasing their output, installing new machinery and expanding their operations. It is now projected that steel production will grow at a compound annual growth rate (CAGR) of around 26% during 2011-2013.

Price volatility

Rebar witnessed unbelievable price variations in the first nine months of 2010. Starting off from AED 1,900 (US$517) per tonne in February, it went up to AED 3,000 (US$816) per tonne in March, marking an increase of more than 50 percent. The prices dwindled to AED 2,800 (US$762) in April and further to AED 2,000 (US$544) in July before it moved upwards again in August to reach AED 2,200 (US$598) and further to AED 2,400 (US$653) per tonne in September. The average monthly rebar consumption in the UAE market is 500,000 tonnes per month or six million tonnes annually.

Many traders attribute this price behaviour to soaring global prices of rebar in addition to increase in raw material costs used in producing rebar locally. Others touted domestic demand to be the predominant factor in causing price fluctuations, also considering the level of stocks maintained by stockists. Some market observers also indicated future price hikes as a concern for erratic price movements. In the second half of 2010, imports dwindled considerably as well on a year to year basis, leading to a relative price hike.

"Steel prices in the region have seen some dramatic flucCrazy BYW PW Boost