SSCs in ME gain popularity as demand for steel heightens

New analysis from Frost & Sullivan mainly service the consumer durables, titled, Opportunity Assessment electrical, construction, storage tanks and of Steel Service Centers (SSCs), in the automotive sectors. Most service centers Middle East, finds that independent SSCs are located in the Kingdom of Saudi Arabia accounted for 17.5 percent of the total and the United Arab Emirates, the largest flat steel supplied in 2013, and estimates drivers of steel consumption in the region.

“Apart from the cost benefits obtained growth rate of 3.3 percent till 2020. SSCs from supply through service centers, customers are favouring SSCs due to benefits such as flexibility, customisation, and value-added services,” said Venkatesan Subramanian, Vice President and Global Leader, Metals and Minerals Practice, Frost & Sullivan. “SSCs can also deliver smaller quantities as against steel producing companies, who generally take up only big orders.”

However, it is important that SSCs keep customer service turnaround times short and ensure quality, considering the complexity of the value chain and the lack of specific market linkages for steel supply through SSCs. Imports and the use of substitute materials too can be a restraint for steel supplied through service centers. Further, factors that affect overall steel consumption, such as slowdown in infrastructural investment and delays in project implementation, will dampen overall service center activity.

Nonetheless, steel plants are seeking to expand their retail operations in large markets by setting up more company-owned service centers or acquiring existing large service centers to improve their product margins. SSCs are also establishing backward integration by setting up cold rolling and hot rolling mills.

“SSCs will aim at engaging the value chain in a more active manner,” observed Subramanian. “As customers continue to adopt this route, service plants will look at collaboration or acquisition to maintain competitiveness in this dynamic market.”