During the 2nd SteelOrbis Turkish Steel Market Conference, which was held in Istanbul on June 1, Mr. John A. Short, Executive Director, Steel and Base Metals of Dubai Gold and Commodity Exchange (DGCX), spoke about the Middle East rebar market and the position which Turkish exporters hold in it.
Mr. John A. Short commenced his presentation by analyzing past developments in the Middle East rebar market and by outlining the future market prospects. He pointed out that after 9/11 a lot of capital had flowed back into the Middle East, which led to an increase in construction in the region and, consequently, to higher rebar requirements. The Middle East rebar market is estimated to have accounted for around 20 percent of total global rebar consumption in 2006. Moreover, due to all the construction projects which have been planned, consumption in the region is expected to grow further.
On the production side of the market, Mr. Short estimated that in 2007 the Middle East countries (including Egypt, KSA, UAE, Iran and others) would jointly produce 25.2 million metric tons of longs while by 2011, taking the region's capacity expansion plans into consideration, combined production is expected to reach 36 million metric tons.
However, demand in the region is expected to grow at a faster rate than production. Mr. Short declared that, even with the planned capacity expansions in place, the region will still be a net importer, particularly as regards rebar and billets, with an expected annual shortage of 9-10 million metric tons.
Speaking about Turkey's position in the Middle East market, Mr. Short stated that to date the Turkish producers have been the main exporters of billets and rebar to the region, and he then went on to declare, "Turkey is the king of the Middle East". To support such a statement, Mr. Short pointed out that in 2006 75 percent of all rebar and billets imports into the Middle East came from Turkey. Turkish exports to the UAE in 2006 totaled two million metric tons, while exports of longs from Turkey to Red Sea Arabian Gulf Shore (RSAGS) countries stood at three million metric tons.
However, as Mr. Short stressed, there is a growing threat to Turkey's position in the Middle East coming from China. Chinese offers of the same steel products and at low prices may endanger Turkey's exports to the region. Since their first arrivals in the Middle East in Q3 2006, Chinese exporters' delivery volumes to the region have continued to grow.
Although the Chinese government is attempting to limit steel production and exports through various measures including the VAT rebate cancellation, export taxes and the shutting down of small steel production capacities, according to Mr. Short, these measures will be insufficient to stop the flow of exports. He added that Beijing's export tax would not stop the provinces and that, while some price disturbances would be seen, the fundamentals of the situation would not be changed. Currently, China dominates the Far East and South Asian markets, and the Middle East may be the next target for expansion.