Steel producer in Syria and international trader, covering almost all products, we discussed with Mr. Fady Debahy of the Fady A. Debahy & Co., the situation of the steel market in Syria and the Middle East, what is ahead of us globally and what steps need to be taken to achieve a better market environment in the longs end. Mr. Debahy also told us about their new investments in steel production in Syria.
On the activities of your company, both in terms of production and trading, which products are you mostly dealing with lately?
We are dealing with all type of steel products including all flat and longs. The only exception here is scrap and pig iron. We are a company holding a good amount of volume in terms of international trading, in addition to our production facilities.
Apart from production, our long product trade volume is about 1 million metric tons per annum.
Also we have our production facilities in Damascus. We have a rolling mill of 300.000 mts capacity per year, which has been producing since last December. Our mill is called SteelTech.
Is your production mainly focused on Syria?
We address the Syrian market and the neighboring countries, such as Iraq, UAE, Lebanon, Jordan. We are also looking to make new markets but our mill is a new mill yet and we still have time to spread.
When are you planning to reach full capacity at the rolling mill?
We are able to produce with full capacity, but we are trying to not to produce too much because of market prices. We decided to reduce our production from the usual two shifts down to one, for the time being. So we prefer to work only 10 hours now because of the crisis.
Which are your most frequent billet and rebar sources on the trading side?
We buy billets from the CIS mostly and sell to the Middle East. We are trading with every region, including China when they are competitive, of course.
Turkish billets are still more expensive compared to the CIS. We don't usually buy billets but rarely rebars from Turkey, due to price levels. Last year and this year we had a few purchases from Turkey. Would gladly supply from Turkish mills as long as competitive.
What is the next plan at your producing facilities?
In April we are going to start cold commissioning of a melt shop under a separate joint venture company called MEDSTEEL. The partners are Debahy, Yared, Demirdjihan and Joud in this joint venture. The capacity at this melt shop is 750.000 mts billets. Some of the production will go to the rolling mill and some part will go to the market. Mainly it will be sold locally, certainly unless price levels for export will be attractive.
We have our distribution with warehouses in Syria, Jordan, Iraq and Dubai under Dehaby Group. We are trading, producing and distributing under this group.
Where will you be supplying your scrap to your melt shop from?
Yes, we will be using locally supplied scrap, and we will be importing about 50 percent of the capacity, but we will reach our full capacity in 2013, and following the cold commissioning in April, we will start our billet production sometime around June. From then onwards we will need at least one and a half years to reach our full capacity. Our scrap purchasing will also be at its full performance only then.
What is the consumption and demand in Syria today?
In Syria, for long products, there is overcapacity of debars now. In 2012, the country is expected to have an overcapacity of 1.4 million tons, so they will either have to find new markets or will have to shut down some capacities.
Our mill is developing, we are producing not only debars, but also mesh and bars as well. Merchant bar market is little bit better compared to that of debar.
Is demand comparatively better in Iraq and Iran compared to other markets worldwide?
Yes, the demand is much better in Iraq and Iran, compared to other regions. But demand in Syria is not really bright. Iraq has a big potential, if things get more stabilized and demand continues to grow there, it will give a push to particularly Syria and Turkey.
What is your market prospect for the time ahead of us?
We are expanding, but this has started in the good times. I am not so optimistic about the near future. I expect 2011 and 2012 to be difficult years. Minimum two years are needed to overcome the weak demand globally.
The market will move up and down in short cycles, during all this time as the market is very sensitive and consumption is weak. When the demand is low, any change in the production will affect the market. The psychological impact is to be added on top of all as well.
When do you think demand may start to pick up?
Frankly, I believe that we are going to see a weakening period up to end of November and December, we might see some slight corrections in between but the market will continue to trend downwards until December. In 2010, we already passed through three cycles, we hope, we do not see a fourth cycle.
May we see certain activity before the next religious holiday?
Everybody expected a downtrend in Ramadan, but it did not happen, thanks to Iran. After the Ramadan, everybody expected the market to pick up with purchases, but it didn't happen either. So it was a surprise for everybody. Even today, it is a surprise that the market has weakened so early. We don't understand why there is no market today. Is it psychological, is the demand low, is the world changing so much, these are the questions today. Frankly speaking, I don't understand why this downtrend came too early.
The existing construction activities and the projects underway seem to be not enough?
There are millions of steel being produced in the world, there is a certain amount of consumption for sure. But the major problem is to be able to rate the real consumption levels, i.e. how much it went down.
What do you think about production cuts?
There have been production cuts. You see, whenever production increase, the market becomes more sensitive, we see a drop. Therefore, the mills should consider carefully before increasing their capacity.
Do you think any further cuts are necessary?
Yes, especially in Turkey, for long products. I think there is overcapacity problem in Turkey, and Turkey is the market maker for the long products, in a sensitive time like this, production capacities better be handled seriously. Maybe shutting down the small mills might also be considered.