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Project delays hit Saudi steelmaker as world watches Trump tariffs

by Neha Bhatia on Aug 29, 2018


The Middle East's and the global steel industries face numerous challenges, such as the impact of project delays and US President Trump's tariffs [representational image].
The Middle East's and the global steel industries face numerous challenges, such as the impact of project delays and US President Trump's tariffs [representational image].

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Donald Trump’s tariffs have posed challenges for global construction procurement and finance professionals over the past few months. In May, the US President announced a 25% tariff on steel imports and a 10% tariff on aluminium sent to the US from the EU, Mexico, and Canada. Commentary on the tariffs, recorded this March, saw economists and world leaders warn of a trade war that could be triggered by these price hikes. 

In an interview with the Wall Street Journal in August, Trump reportedly said his tariffs were spurring the development of a “booming” steel industry. 

CNBC reported that some US steelmakers are having to cut jobs as the tariffs raise prices, but steel production has grown in the last month. The World Steel Association found that crude steel production for the 64 countries that it tracks totalled 154.6 million tonnes (Mt) in July 2018, a 5.8% increase compared to July 2017. 

Hadeed, the wholly owned subsidiary of Saudi Arabia Basic Industries Corporation (Sabic), noted a 9.3% monthly hike in its steel output this July, producing 503,000t during the month, compared to 460,000t in June 2018. The July output is Hadeed’s highest quantity of steel produced all year.

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Al Yamamah Steel Industries, a Tadawul-listed, Riyadh-based producer, has had a less positive year so far, however. On 1 August, the firm said in a missive to Tadawul that its net profit for the nine months to 
30 June 2018 amounted to SAR5.4m ($1.4m), compared to SAR92.8m ($24.75m) during the corresponding period for 2017.  

The company attributed the 94.2% difference in net profit to a 39% decline in sales to the construction and electricity sectors, “due to the stagnation of projects and the intensity of competition, despite the decline in selling, marketing, and administrative expenses, and funding burdens”. In addition, Al Yamamah said its Q2 2018 net loss of SAR5.6m ($1.5m) was caused by “a decrease in the quantity and value of sales to the construction sector by 19% and 16%, respectively”. 

Like Saudi Arabia, China – which is among the world’s top steel-producing countries – also produced its highest steel output of 2018 in July, totalling 81.2Mt during the month.  

Meanwhile, in the UAE, steel production saw a 1.8% drop in July 2018, reducing to 274,000t from 279,000t in June, according to the World Steel Association’s data.

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The UAE’s steel sector, in particular, is seeing notable efficiency improvements being made by major producers such as Emirates Steel. This March, the steelmaker said that its recently developed scrap shredding facility would help to boost the operational efficiency of its electric arc furnaces.

The facility is also expected to play a role in the recycling of scrap metal in the UAE, as well as in reducing operating costs and increasing flexibility for the primary feedstock used by the company.

Commenting on Emirates Steel’s 2017 revenue hike of 22%, chief executive officer HE Engineer Saeed Ghumran Al Remeithi, revealed at the time how the company expected to post growth in 2018.

“Emirates Steel continues to focus on manufacturing steel products to meet the needs of a growing construction market and the huge infrastructure projects ongoing in the UAE and the GCC. We will rely on the heavy sections mill when implementing our expansion strategy, further targeting new markets.”  



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