Steel demand forces producers to raise game

With a shortage of raw materials brought on by increasing global demand and the emergence of China as a massive consumer - and producer - of steel, local manufacturers are placing more emphasis on their relationships with suppliers, enhancing service quality and responding quicker to project changes, to ensure they keep up with demand as well as higher consumer expectations.

Last year, worldwide demand for steel grew by around 7%, according to figures from the Organisation for Economic Cooperation and Development (OECD). An upsurge in steel manufacturing was also seen in the European Union, the CIS countries (led by Russia), and in North and South America.

Meanwhile, the procurement of steel in the Middle East continues to flourish - in the GCC alone, steel demand stood at 15 million tonnes in 2006, of which 14.3 million tonnes were imported. This figure is expected to reach around 19.7 million tonnes in 2008, mainly because of a surge in industrial and infrastructure projects.

Another trend placing even more pressure on production and demand is the consolidation of major steel players, as highlighted by Mittal Steel acquiring Arcelor last year and the more recent takeover of Corus by Tata Steel.

According to Alexander Burdiak, assistant to the general manager of Austrian steel producer Unger Steel, with such challenges facing the industry, strengthening relationships with suppliers has become even more crucial.

"Tight cooperation with suppliers, which has been Unger's philosophy for many years, has become more and more essential," he says. "And this includes architects, developers and clients."

Another way of overcoming industry challenges has been the maintenance of high quality standards in the company's design department as well as in production.

"We are constantly updating employees' qualifications and the software in the in-house design department," adds Burdiak.

"We also use a direct electronic interface between the in-house design department and fabrication, in order to adjust quickly to required changes, and employ highly qualified project managers."

Unger Steel opened its US $23 million (AED85 million) structural steel factory in Sharjah's Hamriyah Free Zone in April. The factory currently has the capacity to produce 50,000 tonnes a year to service the UAE. Production at the plant, which is spread over 100,000m², is carried out with three bays using the latest machinery. All shot blasting machines, cutting and drilling lines, coping robots and pipe cutting are computer-controlled. One of the company's first orders was for the supply of structural steel for a labour accommodation complex at Hamriyah.

"The new facility for structural steel in the Hamriyah Free Zone contains three independent production lines, which are very flexible to customer demands within a short timeframe," says Burdiak.

Among the trends expected to drive the industry over the next year is clients' expectations in terms of the quality of service provided as well as the increasing importance of responding quickly to project changes, according to Burdiak.

"The completion of the client's orders on schedule will become more and more crucial since the delayed handing over of projects to the investor represents a considerable loss in the return on investment. Therefore, Unger is constantly focusing on completion of projects in or before time with all our orders."

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