UAE steel prices fall by Dh200 as producers continue cutting rates

Prices of steel rods in the UAE fell by another Dh200 during the past one week to Dh1,800 as steel producers across the region continued to cut rates.

Qatar Steel became the latest to reduce prices when it announced that starting today, steel rods of diameters ranging from 10mm to 40mm will be made available locally at QR2,400 (Dh2,422) to QR2,460 (Dh2,484) per tonne.

Last month another leading Gulf producer Saudi Basic Industries Corporation (Sabic) cut prices by 30 per cent or SR1,200 (Dh1,172) to SR2,700 per tonne. In the first week of October, it announced a cut in steel rebar products by SR720 per tonne. The total price cut by Sabic since September has gone up to 43 per cent.

Traders in the UAE yesterday warned that steel prices would further come down as the supply continues to exceed demand.

"Prices are continuing to fall in the UAE and is much lower compared to even the reduced prices of Sabic and Qatar steel. There is no let up in supply, and demand continues to slowdown," said a senior Dubai-based trader.

Meanwhile, Turkey yesterday increased steel prices by $50 (Dh183) per tonne. "The increase according to them was because of a rise in the prices of scrap. But it is not going to halt in any way the continuing drop of steel prices here," said a trader.

According to reports, quoting Ali bin Hassan Al Miraikhi, Director of Trade Affairs at Qatar Steel, a reduction in steel rod rates was on the cards for some time since they had reached undesirably high levels.

"We had never witnessed such soaring rates of steel in the local market," he said. With a price reduction being introduced, things should be easier for the building industry and other users, Al Miraikhi added.

The company has begun producing at maximum capacity this year, with production tipped to reach a record 1.5 million tonnes. The production last year was 1.1 million tonnes.

The total production of Sabic during the first nine months of 2008 of long and flat products was 3.786 million tonnes as against 3.270 million tonnes during the same period of 2007, up by 15.7 per cent. The increase in production is caused by coming on stream of a number of its expansions. The total sales during the first nine months of 2008 amounted to 3.850 million tonnes.

According to a Global Investment House report, the demand for steel in the GCC would continue to remain robust despite the global financial turmoil.

Steel consumption across the GCC has increased significantly underpinned by demand from construction. Liberalisation of the real estate sector and diversion of oil revenues towards construction and infrastructure development, the report said, has led to a high demand for rebar, with annual consumption of an estimated 13 million tonnes by the GCC countries. The report said 40 per cent of the total steel demand is met locally, while the rest is imported mainly from Turkey, North Africa and CIS countries. The demand for long products, which are mainly used in building and construction, form 60 per cent of the overall demand. An estimated 10-15 per cent of the construction cost is comprised of steel bars cost.

GCC steel production, it said, is fairly fragmented with 18 steel companies engaged in production of raw steel and finished steel products. Saudi Arabia is the largest producer in the region. UAE tops the list with a per capita consumption of 2,348kg followed by Qatar 985kg. GCC as a whole has a per capita average consumption of 645kg, which is higher than the world average of around 240kg.

Despite the financial turmoil affecting world economic growth, the report said, the demand for steel will remain strong in the GCC. "An estimated $850bn will be spent by GCC countries in the next three to five years on infrastructure, petrochemical industry, tourism and other projects. These huge projects will create an estimated incremental demand of 17 million tonnes per annum during the period," said the report.

As more steel industries are being set up as part of the diversification plan, there would be a jump in inter-GCC trade with Oman and Bahrain supplying iron pellets to regional countries such as Saudi Arabia, Qatar and UAE while importing finished steel products from these countries.

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