Mena steel demand expected to grow 5.7% in 2012, report says

Steel demand in the Middle East and North Africa (Mena) region is likely to grow 5.7% in 2012 as higher oil prices feed investment in infrastructure and steel projects.

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Demand in the region has been fuelled by the “liberalisation” of the real estate sector and the diversion of oil revenue towards construction and infrastructure, according to a joint paper by Frost & Sullivan and World Steel Assn.

Despite the sector experiencing strain from the property downturn from hubs such as Dubai, the “rise in the volume of middle-income housing” and the subsequent decline in luxury building have been apparent.

And after rebounding from the global economic crisis “in a shorter duration”, demand will reach 5.7% this year.

This reverses the fall of 2% in steel growth in 2011 due to the political upheavals in many of the Mena countries.

It is expected to grow by 8.4% in 2013.

Steel growth

The report argues that the region’s iron and steel industries have developed swiftly in the last four to five years on the back of this demand, with around 67 plants in operation at a total value of $2.8 billion.

Regional production is expected to reach around 85 million tonnes by 2013, with crude steel production projected at more than 50 million tonnes, up from 27.4 million tonnes in 2010.

It was the second-fastest-growing region behind Asia that year, contributing around 2% of global steel supply.

“This massive positive demand-supply gap (which is likely to be wider gradually in the next 5-10 years) signifies immense future business opportunities in [the] steel sector prevailing in Mena,” the report stated.

It added that the steel production, though “fairly fragmented”, gave great opportunities for direct reduction iron (DRI) production since oil and gas were plentiful and cheaper than other regions.

The report’s country-by-country analysis – which did not include Turkey – found that Iran still produces more than double what the others did in Mena.

The country produced 13.04 million tonnes in 2011, compared with Egypt’s 6.486 million tonnes and Saudi Arabia’s 5.275 million tonnes.

Iran has produced a mean average of 1.252 million tonnes per month in 2012, compared with 551,800 tonnes in Egypt. Iran’s highest monthly output was recorded in May, at 1.34 million tonnes, which is the latest data gathered by the report.

The report highlights that steel and aluminium projects in Gulf Co-Operation Council (GCC) countries are not just an attempt to industrialise the countries further, but to boost inter-GCC trading.

For example, projects in Oman and Bahrain that produce iron pellets would sell them to Saudi Arabia, Qatar and the UAE. The latter countries would in turn sell the former the finished steel products.

According to Frost & Sullivan, the region makes 40% of the steel it consumes.

Turkey, Russia, Ukraine and China dominate the supply of foreign-sourced steel, a trend attested by UAE traders this summer, as flat and long products largely declined in the wake of lower demand on a mixture of regional political uncertainty and concerns about the eurozone’s stability.

The reliance on imports means steel prices are greatly affected by the international market.

Saudi Arabia remains the great hope for steel sellers in the region. The country continues to spend billions of dollars improving its infrastructure as well as building new “economic” cities, universities and hospitals.