Five minutes with ESI’s Mohammed Salem Al Afari
Mohammed Salem Al Afari, vice president – marketing at Emirates Steel, speaks about market conditions, the challenges being faced, and oversupply issues that are plaguing many within the industry
What is Emirates Steel’s projected production level for this year?
Emirates Steel has a capacity to manufacture 3.5 million tonnes of steel a year. However, we haven’t yet been able to produce at full capacity. Each year, we look to increase production and, hopefully, in two years, we will get there.
One of the reasons we aren’t operating at full capacity is because we have just introduced a heavy sections mill. This year, we will definitely exceed three million tonnes.
How much of your production is consumed by the local market?
Approximately 70% of our total production is consumed by the GCC markets. Around 80% of rebar, 68% of sections, and 20% of wire rod produced by Emirates Steel are consumed by local projects in the region.
We have a strategy that helps us maintain our exports, even though we see better opportunities in the local markets.
We have relationships to preserve with our foreign clients, which also help us maintain an international presence for the brand.
To which markets do you export?
We export to all markets, but Europe, the United States, Australia, East Asia, Africa, and the Middle East are our biggest [customers]. Our focus is mainly on the local markets in the GCC.
What challenges has Emirates Steel faced during the last year?
Last year was really rough for us, [for] many reasons, such as Brexit, global steel overcapacity, low oil prices, strengthening of the US dollar, as well as the global economic downturn. However, 2016 has been a positive year for us, and we believe the worst has passed. Next year won’t be easy, but I don’t believe it will be as tough as 2015.
How would you assess the current state of construction in the GCC region?
As you know, most of the countries in the region are oil-dependent economies. And when the oil prices went down, it affected government spending.
We have seen a decline in the [GCC region’s] construction sector. I believe the drop in the GCC construction sector touched 1.6%, and is expected to further decline by 0.4% next year. The second half of 2017 and first quarter of 2018 look promising.
How do you handle competition?
The UAE has always been an open market. With some players [having supplied] materials to this country for a very long time, it’s going to be very hard for them to give up this market so easily. The UAE is already burdened with overcapacity – almost 5.3 million tonnes of rebar is rolling in the UAE market. With consumption at 3 to 3.5 million tonnes, there is a big issue of oversupply.
Local producers [...] need to find ways to compete with [overseas steel suppliers], either by improving efficiency, reducing costs (which Emirates Steel is doing), or by introducing barriers [to] imports. But we have to continue to supply the market; we cannot be left out.