Middle Eastern mills to have competitive edge

Middle Eastern mills to have competitive edge

Gilles Calis of SteelConsult International told the Middle East Steel Conference earlier today that despite the tightening market conditions in 2005 compared to those of 2004, the steel industry is still highly profitable. The iron ore price negotiations are likely to end up in further increases this year. Calis thinks that the structural tightening in global scrap supply will probably last for another decade and thus, the demand for steel making basic pig iron and direct reduced iron will be increasing. As raw material costs of other steel producers increase, the DRI and/or HBI based steel mills in gas rich Middle Eastern countries may benefit and will remain highly competitive, of course provided a dual pricing system is implemented. It also needs to be noted that the steel mills in Middle East region have a significant labor cost advantage versus the mills in mature markets. Calis also thinks that iron ore and coke prices should go down in the future whereas energy and scrap prices have made a structural change up.