A steal for steel

Steel producers have recently cut production and prices.

After reaching an extraordinary high in 2008, the price of steel has fallen dramatically over the past year, but what is the future for the commodity in the Middle East? Construction Week takes a look.

fter hitting a peak in mid-2008 the price of steel in the Middle East began to fall sharply, giving welcome relief to those in the construction industry.

The sharp drop in demand caused by the global economic downturn was the main reason for the price change, but factors such as oil prices and an unusually high demand during 2008 were also to blame for the price difference that is now being seen. So what does the future hold for the steel sector and how will this affect those in construction?

Story continues below

Advertisement

FEATURED COMMENT Please click here to comment on this article

Mixed views are currently being given by those in the sector as some nervousness remains regarding the economic climate and future of the region’s construction industry, which is one of the largest consumers of steel products.
 

Monthly demand for rebar in the region is reported to have dropped to 200,000 tonnes, down by more than 50% compared to July 2008. However, signs for the immediate and long-term future show prices beginning to stabilise, and in some cases, rise. Some regional steel providers are seeing such a positive outlook for steel demand that they are also planning expansions.

Price changes
Materials supplier Danube reported a 15% rise in the price of building materials in the Middle East during April, compared to Q1 of 2009. This has been attributed to firms rebuilding stocks as the market begins to restabilise. Steel reportedly underwent the sharpest price rise – from US $430 (AED1580) to $500 per tonne.

“The current correction in the real estate and property sectors is driving the move in prices of construction materials, which will eventually lead to a healthier market with more stable growth opportunities in the future,” predicts Danube Building Materials chair Rizwan Sajan.

Price differences vary depending on grade and quality, but according to MESteel, the online portal for buyers and sellers of steel in the Middle East, the current market prices across the board are significantly lower than they were a year ago, having fallen in the last few months of 2008 after rising earlier in the year.

Under its UAE steel price indicator for May 1 2009, stainless steel HR coils of 316L base cost $3000 to $3100, a fall from the January 2009 price of $3500 to $3600 per tonne and less than 50% of the January 2008 price, which was stated by MESteel as $6400 to $6500 per tonne.

The portal cited steel billets and blooms at a cost of $730 to $750 per tonne in January 2008, this reducing to $400 from $450 per tonne in its January 2009 figures, and further still to $390 from $420 by May 1 2009. However, the past few weeks have seen further change in the market.