At the SteelOrbis 2014 Fall Conference & 71st IREPAS Meeting being held in Berlin on September 28-30, Abdulaziz Abdul Rezaq Hashim, head of market research at Qatar Steel, said that steel consumption in the
Middle East is about four percent of global steel consumption, but the consumption growth rate in the region is expected to be three times the worldwide rate in 2015, driven by strong fundamentals. In the
Middle East, the production of long products is expected to grow faster than regional demand over the next five years.
Long steel product output in the Gulf Cooperation Council (GCC) countries is forecast to grow at a faster pace than demand as rerollers' capacity utilization is improving amid higher steel billet availability. However, the GCC region will still remain a net importer until 2019, when production is expected to catch up with demand. Overall long steel product capacity utilization in the GCC stands at 67 percent.
Billet imports in the GCC region have been on an overall declining trend since 2012 due to the GCC mills' increased capacities. Billet imports from Turkey have dropped significantly since 2013 due to lower Turkish crude steel production and competition from the CIS, while the Chinese import share has been increasing noticeably in wire rod since 2011, rising from 11 percent to 95 percent in 2014. Mr. Hashim said that, for GCC market players, Chinese materials are the last resort because of quality issues and lead times, adding that the best solution to fight the flow of Chinese products is to adjust prices.
According to Mr. Hashim, the strength of the construction industry in the GCC supported by government spending since 2009 has provided a bolster for new steel investments in the region, while there is a strong commitment to supporting the growing steel demand in the region. Active steel projects in the region peaked in 2011 with $5.8 billion worth of projects mainly directed towards billet/bloom capacity investments. For the 2015-2020 period, most of the planned steel investments are for flat steel products.
Regarding the downward trend of rebar prices seen in the UAE market since 2012, Mr. Hashim pointed out that the same trend is likely to continue in the short term due to the lower cost of raw materials and semi-finished products and increasing Chinese imports at low price levels. He underlined that one of the factors affecting long steel product prices is the crisis in Ukraine which has been impacting billet supplies to Turkey, increasing Turkish mills' reliance on scrap. He went on to say that scrap prices may soften due to the influence of iron ore prices.
The Qatar Steel official also commented on the main reasons for the divergence between scrap and iron ore prices, citing the iron ore expansion projects particularly in Australia and Chinese iron ore imports exceeding production requirements, leading to high inventories of iron ore at Chinese ports.