GCC countries, India, China and even Brazil are clamouring for more steel. The annual global steel supply is estimated at 1.5 billion tonnes. In 2006 the Middle East and North Africa consumed a whopping 35.4 million tones of steel products but only produced 24 million tones.
The UAE is the biggest consumer per capita of steel. And Goldman Sachs, perhaps the most reliable source in measuring such things, says that steel production must reach 2.6 billion tones annually by 2017 if supply is to satisfy demand.
But steel suppliers here in Dubai, under the shining sun and surrounded by glimmering golden sands of a perfect world, life goes on without so much as a care where the next load of steel comes from.
Except that is not really the case. As Construction Week discovered in its investigation of steel supply and demand and skyrocketing costs, 160 construction projects are experiencing delays. Problems in acquiring heavy equipment? Yes, in some cases. Finding enough cement? Yes.
But to listen to steel suppliers, all is good in supplying enough steel to sites.
It doesn't take a rocket scientist to come to the conclusion that some suppliers may be taking advantage of contractors' fears of the global steel shortages by hoarding the stuff in an effort to boost prices. Steel shortages are already responsible for soaring prices, but by stockpiling rebar in warehouses, those prices will continue to climb.
As Imad Al Jamal, vice chairman of the Contractors Association, puts it: "(Suppliers) buy quantities of steel, and they keep it away for six months until the price checks up. It is called hedging in business terms."
I don't buy the argument that hedging doesn't exist in the steel industry. Hoarding a product, especially in this high competitive building environment, to boost prices is the oldest financial game on the planet. It's simple exploitation of demand.
It's only a tiny fraction of suppliers who want to feather their own nest with outrageous profits. But the fact remains that there is no mechanism in place that allows the Dubai authorities to protect the industry from unscrupulous dealers. Granted, the industry regulation is in its infancy in the UAE, but if the country is to achieve its ambitions by building the most remarkable city in the Middle East it must keep a tight leash on the profiteers.
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