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The double impact of slowdown in construction in the UAE and Saudi Arabia, together with new production capacity coming onstream, has allowed steel supply to catch with demand.
That’s according to an assessment from British consultancy Business Monitor International (BMI). The forecaster believes that as a result, steel imports into the region are expected to carry on declining.
BMI cites Emirates Steel Industries’ move to increase production capacity by 207% to 2 million tonnes annually and huge investments from Saudi Arabia’s Al-Tuwairqi Group and Saudi Iron and Steel Company as being behind the easing in steel demand.
“However, we note that there are risks to the upside, as the mega-projects are continuing, with the Mecca-Medina railway and the economic cities under way, while regional construction players are flocking to the kingdom in search of business,” said the BMI report.
“The silver lining is that the new local capacity has now had some space to develop, and will create spare capacity that should assure that when activity resumes, steel prices will experience a more normalised rate of increase compared with the hikes that were witnessed in mid-2008.
“Imports of steel in the Gulf are expected to fall to 18 million tonnes in 2009 from an estimated 22.5 milion tonnes in 2008, the Steel Statistics Bureau notes,” the report concluded.
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