MIDDLE EASTERN STEEL SECTOR EXPANDING AT A RAPID PACE
China continues to dominate the headlines in the world steel sector. This means exciting developments elsewhere are being overlooked. One such area is the Middle East which is also growing fast. MEPS latest publication " World Steel Outlook" , forecasts production growth of 10% this year.
The region`s output has more than doubled since 1992, and its steel consumption has grown at almost as fast a pace over this period. Growth rates were more modest during much of the 1990s, but in the last few years a veritable boom has built up.
Huge investments are being poured into infrastructure projects in many countries of the area, and these will continue to drive steel demand upward for at least the next 24 months. From the $US2.2 billion " intra-city train" planned in Dubai, to new water systems in Saudi Arabia and an expansion of the Bahrain aluminium smelter, building rates in many parts of the region are accelerating.
The United Arab Emirates is one focus of rising construction. The country`s steel demand is forecast to exceed 1.5 million tonnes in 2003, up by 20% in the last three years, almost entirely because of the strong growth shown by the building sector.
Recent forecasts by the steel industry itself put Middle East demand growth at a comparatively modest 7 percent per annum for the next couple of years. This may have to be revised upwards. Iran - the region`s biggest steel producer and consumer - is increasing at a rate of more than 10 percent per year.
This is without considering Iraq. The billions of dollars that the USA is planning to pump into reconstruction work will see steel consumption increase dramatically in that country. Some suppliers to the region reckon that as much as 3 million tonnes will be needed.
So it is not surprising that projects to expand steel production are under way right across the region - from Libya in the west to Pakistan in the east. Some of these are enlargements of existing works, while others are greenfield installations.
Most ambitious is Iran: firm projects exist to raise crude steel output from 7.3 million tonnes last year to 14.7 million tonnes in the medium term and government officials are already contemplating 20 or even 25 million tonnes. Qasco in Qatar and Hadeed in Saudi Arabia are among the producers also planning expansion.
It is noteworthy that, while much of the additional capacity is in construction steel, some Middle Eastern mills are looking to produce other types including stainless strip, tinplate and alloy steel bars.
Steel companies from the region have also demonstrated an ability to take advantage of new opportunities as they arise - for example by acquiring the Sheerness plant in the UK and using it to produce billet for shipment to a bar mill in Saudi Arabia.
ASIAN MARKET PRICE SCENE
FLAT PRODUCTS
In Japan, local demand from the auto, industrial machinery and shipbuilding sectors is forecast to remain steady. Exports to South East Asia continue at a high level and prices for deliveries to China have moved up substantially. However, stock levels continue to grow. Domestic inventories of strip products, at end August, were up by 4.9 percent compared with July - the sixth consecutive monthly increase. Quayside warehouse stocks of imported flat products rose 3.1 percent over the same period, representing an upward trend for five months.
The South Korean steel sector continues to perform quite well, despite some slow down in economic growth. Export business, particularly with China, is strong. Domestic prices are stable. In Taiwan, CSC has successfully implemented the fourth quarter price rise announced last month for the local market. Demand from mainland China remains good and International slab prices are soaring. The company recently decided on period four pricing policy for export business. Values for shipments of strip products to Japan were left unchanged from the previous quarter. Plate prices to South East Asian and Chinese clients were raised by $US20 per tonne.
LONG PRODUCTS
Japanese producers are struggling to raise prices on the back of soaring ferrous scrap charges and transport costs. Currently, construction remains in the doldrums and forecasts for the short term are not encouraging. In South Korea, sales of long products are expected to be boosted in the near future, once reconstruction work gets under way following the damage caused by this Summer`s typhoon. Present demand is already strong because of high levels of activity in the home building and infrastructure sectors. The Taiwanese construction industry is in a poor state. Steel values have largely stabilised this month, following recent upward movements.
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