Steel industry head blasts lack of GCC investment

Local manufacturers will be favoured to 'rebuild Yemen and Iraq' says Dr Al-Tuwairqi.

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Potential investors in the Middle East’s steel industry should not miss the “golden opportunity” to invest in steel companies and plants while growth is still strong overall, said the chairman of the Arab Iron and Steel Union.

In an extraordinary broadside against investment companies that have favoured other regions of the world, Dr Hilal Hussain Al-Tuwairqi said the Middle East had so many advantages that could and should be exploited.

“Saudi is expanding, Qatar is expanding, Bahrain is proceeding. This is your golden chance, to join hands and build steel factories all over the MENA region,” he said at a Steel Business Briefing conference in Dubai on Sunday. “I am wondering why you are not doing this, why you are not building steel factories, in this region?

"Because it’s cheaper: the electricity is cheaper; the manpower is cheaper; the location is excellent. What’s wrong?”

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He added that the Gulf countries in particular are “three hours from Africa, a few hours from the Arabian Sea to the Far East” to complement the cheaper labour and utilities, but that these countries put “trillions” into Western economies from importing steel that could be manufactured locally.

The problem with potential investors, he said, lies with their mindset, and that this dislocation between the Middle East and the rest of the world has wider social implications.

“You want us to remain traders - import everything from your countries and not manufacture anything,” he said. “That is worse than the atom bomb, the nuclear bomb. If we remain sending our youth to your countries to become educated, to see how you’re living, when they come back and they don’t find jobs, their reaction is big.”

The Gulf region has largely been an importer of steel and other metals, with Turkey a particularly strong player that has undercut local prices in certain markets.

This is despite the swift development of steel plants in Saudi Arabia, UAE and Qatar, which are usually cited as the three biggest markets, and the aggressive expansion plans of companies such as Saudi Arabia’s Zamil Steel and UAE’s Emirates Steel.

Yesterday it was announced that United Steel Company - a joint venture between steel producer and investment vehicle Gulf United Steel Holding Company, also known as Foulath, and Japan’s Yamato Kogyo - bought Saudi Arabia’s United Gulf Steel Mill Company Limited.

Construction for buildings and infrastructure projects make up half the value of steel contracts, according to Abu Bucker Husain, CEO of Al Ghurair Iron & Steel, in a later presentation, with steel demand in the region set to grow 5% overall.

The dominance of imports is partly rooted in the raw materials, which are mostly produced from outside the region, along with the commercial structure that favours imports. Husain noted that there is no import duty for foreign manufacturers, which not only reduces the overall logistical cost but allows the region to become a “dumping ground” for companies.

Dr Al-Tuwairqi said regional companies would have priority when it comes to supplying steel needed for rebuilding Yemen and Iraq, which potentially represents multi-million dollar deals, and would have access to local credit lines.

“I will accompany you and make sure that you people, when you invest, it is secure, regardless of the change of regime, and you are free to bring your money, and take it out.

"And by the way, you don’t have to bring your money: local government will give you up to 70% soft loan, to be repaid over 15 years. Commercial banks can give you the rest of it, so you can come with your equipment.

“Do not lose this chance.”