Flip through the latest issue of Gulf Weekly.
THE iconic Burj Dubai, expected to become the world’s tallest building, consumed over 38,000 metric tonnes of steel rebar when it touched 70 levels.
The World Trade Centre Residence (WTCR), a state-of-the-art 40-storey luxury residence in downtown Dubai, used 630 metric tonnes of structural steel components after seven floors were completed.
With mega structures like these sprouting all round the Middle East, the demand for steel is shooting up, so are the prices.
This is forcing countries to bolster their steel production by augmenting the existing plants and creating new ones even as industry giants plan mergers and acquisitions to grab more market share in the region.
A $1.2 billion steel plant is being planned in Bahrain, which will not only cater to the local and regional markets but also boost the country’s exports.
Yamato Steel is working on the project with a Gulf consortium called Foulth, that includes steel and chemical maker Industries Qatar and Kuwait-based Gulf Investment Corporation.
The booming demand for steel, which has led to a 30 per cent increase in its price, can only be met by increasing the production capacity across the region.
The proposed launch of world’s first steel futures by Dubai Gold and Commodities Exchange indicates only one thing – the steel market is booming.
With more than $1 trillion worth of construction projects planned or under way in the GCC alone, demand for steel products has grown to unprecedented levels.
The economic boom has ensured that demand for steel products outstrips supply. For example, the GCC produces 7 million tonnes per year (t/y) of steel reinforcement bar (rebar), which falls short of the local demand of more than 9 million t/y.
In Dubai alone, for example, there are over Dh5.58 billion worth of construction where steel is the key ingredient.
The scorching demand for steel in the UAE has led Al Ghurair Iron & Steel (AGIS), part of Dubai-based Majid Saif Al-Ghurair Group, to add a second phase to its proposed steel plant at Industrial City Abu Dhabi 1 in Musaffah.
The facility will be built on the company’s 100,000-square-metre site close to the Emirates Iron & Steel complex.
Phase 2 is scheduled to start production in the first quarter of 2009, and will include a 500,000-tonne-a-year (t/y) pickling line, a 500,000-t/y cold rolling mill, a 200,000-t/y continuous galvanising line, and a 100,000-t/y colour-coating line.
Phase 1 is already under development and will include a 350,000-t/y semi-continuous pickling line, a 250,000-t/y cold rolling mill, a 200,000-t/y continuous galvanising line and a 75,000-t/y cut-to-length line.
Yet another UAE firm, Emirates Iron & Steel plant owned by Abu Dhabi government-owned General Holding Corporation (GHC) is planning a major expansion in order to increase its capacity.
Total project costs are estimated at about $1billion.
In Saudi Arabia, the Saudi Iron & Steel Company (Hadeed), the wholly-owned subsidiary of Saudi Basic Industries Corporation (Sabic), is planning to double its production capacity to more than 10 million t/y by 2015.
Today, the Gulf’s largest steel producer has a capacity of more than 3.3 million tonnes a year (t/y) of long products and 2.2 million t/y of flat products.
In Iran, which is taking all the efforts to strengthen the sector, steel production is due to hit 10.5 million tonnes by the year-end. Iran’s current steel demand is between 16 million tonnes and 17 million tonnes.
Eight steel production projects are to be set up in the nation’s less developed provinces. Each of the plants will be capable of producing 800,000 tonnes of the commodity per year.
However, to meet the still growing steel demand in the country, Iran had recently allowed Indian steel giant Tata to produce four million tonnes of steel at Iran’s Special Zone for Metal and Mineral Industries.
The cost was projected at $1.5 to 2 billion, and raw materials, gas and ironstone, are being provided by the Iranian side.
Meanwhile, world steel production is expected to reach over 1.35 billion tonnes in 2007. This is mainly due to upgrades of official figures for Canada and India. The increase is almost 8.5 per cent.
Demand continues to be firm across the globe. All regions are expected to record higher output this year compared to the previous twelve-month period.
Production of steel in the Middle East is predicted to increase in 2007 by 0.5 million tonnes relative to the figure in the previous year.
Prices of steel have seen extreme volatility in recent months, fuelled by fluctuations in demand and supply, sentiment, freight rates and rising costs of raw material.
The high volatility in steel prices is unusual.
Its severity is evident in shorter price cycles, which have fallen from five to seven years in the 70s and 80s to two to three years in the 90s, further shrinking to a mere four to five months in recent months.
With the introduction of futures in steel, the physical steel supply chain would be in a better position to mitigate the negative impacts of price volatility.
The price volatility can be in excess of 15 to 20 per cent, putting tremendous stress on cash flow management and project profitability.
