MEIS 2013: Infrastructure investment will continue to fuel growth engine for Mena steel market

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Flagship projects such as Expo 2020 in Dubai, the World Cup in Qatar in 2022, the economic city project in Saudi Arabia, and the expansion of the rail network in the region are driving steel consumption.

“All these are positive signs that indicate growth,” Al-Qadeeri said. “Demand [in the GCC] in the next 10 years will go up to 30 million tonnes,” he added.

The IMF is predicting 3.5% real GDP growth in the region for 2013 and 3.5-4% in 2014.

“The engine for this growth is the GCC – driven by high oil prices, but also strong commitment to recycle petro-dollars,” Richard Thompson, editorial director of MEED said.

“The oil price average for this year is around $105[per barrel], and a marginally lower forecast for 2014 at around $100. This is going to maintain high liquidity levels in the capital investment market and major project market in the GCC,” he added.

Saudi Arabia’s fast growing and young population will provide a platform for growth for many years to come.

“There will have to be a second phase of infrastructure investment. This will be good news,” Abdulaziz Sulaiman Al-Humaid, executive vp, metals, Sabic said.

While construction will remain the key driver for steel consumption in the region for many years to come, this will eventually change as local economies mature.

“Steel in construction growth will continue. In the UAE, in the long-term, steel consumption will switch to manufacturing – oil and gas, shipbuilding, may be the car industry, white goods applications,” Saeed Ghumran Al Romaithi, ceo of Emirates Steel said.

“Eventually construction will mature. We need to be planning for other applications for steel – this will come over time,“ he added.

Challenges in project implementation
But there are also challenges in for growth of steel demand in region such as labour issues in Saudi Arabia, the civil war in Syria, financing in Iraq, high youth unemployment and a scarcity of gas allocation.

The slowness and apparent lack of project implementation hampers steel industry expansion.

“There is investment, there are projects – but not at the speed you think. The projects which may take 2 years elsewhere, in our region take 5 to 7 years or may disappear before they happen,” Hilal Al-Turwairqi, chairman of Al Turwairqi Holdings said.

“We have to expand, create infrastructure, create jobs – are we doing that – the answer is “no”,” he said.