A continued flood of cheap exports from Turkey and a looming glut of new output capacity in the Gulf is likely to keep Middle East steel markets depressed for years to come, say industry executives. GCC leaders have singled out steel-making as a key means to build up heavy industry and diversify their economies, but regional production has been hit hard by a collapse in demand as construction and infrastructure projects have been halted across the world.
Turkish steel producers, who have been accused of dumping in Egypt and Gulf markets, will need to reduce output and curtail loss-making exports to avoid bankruptcy, said Kerem Vaizoglu, the export manager for Ekinciler Iron and Steel, which is based in Istanbul. Official statistics show Turkish exports of steel rebar rose 22 per cent in the first three months of the year compared to the same period last year, even as producers across the world slashed output, he said.
"The only way for Turkish mills to get out of this is to cut down the production according to the market situation," Mr Vaizoglu told a steel conference in Dubai led by Steel Business Briefing. At a steel industry gathering in Abu Dhabi earlier this year, Arab steel executives said that Turkey was exporting steel to the region at a loss to increase its market share. Sultan al Mansouri, the UAE Minister of Economy, said Arab countries would co-ordinate policy with one another to address "the issue of dumping of steel coming from different countries". Mr Vaizolu declined to characterise Turkey's exports as "dumping".
"From time to time Turkey might be selling below the cost, but that's not the purpose?the aim of this action is not to dump on others," he said. "But sometimes the market forces everyone to do the same thing," he added. "If there is going to be an anti-dumping case we know how to handle it." Even if the flow of cheap imports eventually falls off, the industry will still face a huge oversupply of 5.5 million tonnes of steel per year by 2013 because of the rapid expansion of GCC steel-making plants, said Raed al Muhaideem, the managing director of Al Muhaidib Building Materials in Saudi Arabia.
"Steel, if all the announced projects are executed, will be having a tough time, especially now that demand [growth] in the GCC countries is expected to slow down," he said. In the UAE, steel consumption will remain volatile, said Ajay Aggarwal, the chief executive of RAK Steel, which operates plants in Ras al Khaimah and Oman. "I think the market is very uncertain," he said. "In the long run the market will pick up, but no one knows when it will pick up, and in the long run we are all dead anyway."
Emirates Steel Industries, which is based in Musaffah and owned by the Abu Dhabi Government, has been insulated from the turmoil to some extent because it sells a large part of its output on the domestic market to Government-linked firms. The firm increased output in the third quarter as it commissioned its new integrated steel-making plant, said Gregor Munstermann, the firm's new chief executive.