GCC steel prices may fall on oversupply

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Jun 2010

Weak steel demand in the Gulf might lead to oversupply in the market, forcing prices to fall further in the coming weeks, steel traders said yesterday. Construction had slowed down in the Gulf over the past year as economic crisis set back many of the major projects in the region, curbing appetite for steel. "There's an oversupply in the market, which is pushing prices down and many of the mills are looking to increase their exports because there is excess capacity in this region," said Bhaskar Dutta, Chief Executive of Oman-based Jazeera Steel. Steel billet, which is used in making rebars for construction, held steady last week at about $430 (Dh1,578) a tonne compared to $420 a week earlier. But some traders believe the price could tumble in the weeks ahead as a seasonal slowdown is seen knocking down demand in key consuming areas such as the Mena.
Economic activity in the Gulf tends to subside during the holy month of Ramadan, which begins towards mid-August this year. "We are seeing a drop in orders from construction firms in the UAE, Kuwait, Bahrain and many of these companies already have stocks of steel so buying is not on their agenda right now" said one Dubai-based trader.
Dumping from China, Turkey and Eastern Europe into the Gulf markets is also a concern to local producers in the region that struggle to match import prices, said BS Shetty, Commercial Manager of the UAE-based Al Ghurair Iron & Steel.
"The problem is that there is an oversupply in the market, so many countries are dumping steel here making imports much cheaper than the local prices," he said. With the capacity of mills in the region and the current level of demand, the Gulf could potentially be self sufficient, said Shetty.
"But this will not happen because imports are always going to be cheaper than the local products," he said.

Source: Reuters