Emirates Steel sees UAE demand down 40%

STEELY RESOLVE: Despite the slump in demand, Emirates Steel will double output in 2009 from 2008 to around two million tonnes. (Getty Images - for illustrative purposes only)

Demand for steel in the UAE will fall around 40 percent this year as construction work slows, the chief executive of state-owned Emirates Steel Industries said on Monday.

Hundreds of billions of dollars of construction projects have been put on hold in the Gulf Arab state since the financial crisis curbed property investment. The near $100 fall in oil prices from last July's peak has brought an end to an economic boom in the world's top oil exporting region.

UAE steel demand will fall to around 3.5 million tonnes in 2009, from around 5.5-6.0 million tonnes in 2008, Jim White told Reuters on the sidelines of a steel conference in Abu Dhabi.

Despite the slump in demand, Emirates Steel will double output in 2009 from 2008 to around two million tonnes after bringing new capacity online, White said.

"We are well up this year despite the slump, we are selling twice as much as last year," White said. "We have got new capacity and we are finding buyers."

The Abu Dhabi-based company started commissioning a new mill last month.

Emirates Steel was taking a bigger market share of the UAE market at the expense of imports, White said. The company was also exporting some steel, he added.

The company was concentrating on selling larger volumes rather than worrying about the price, White said.

Demand throughout the Gulf region was a concern as it was still unclear how each country would be affected by the global economic slowdown, Emirates Steel Chairman Hussain Al Nowais told Reuters at the same event.

"My concern is with projects in the rest of the region," Nowais said. "Which of them have been on hold and how will this impact demand?"

Steel demand was likely to hold up in the emirate of Abu Dhabi even as it fell elsewhere in the UAE, Nowais said.

"I am not concerned about Abu Dhabi, because Abu Dhabi is still committed to its infrastructure projects," Nowais said.

The neighbouring emirate of Dubai is the location of many of the UAE's delayed construction projects. Abu Dhabi leads the UAE, holds over 90 percent of the country's oil wealth and has felt the impact of the financial crisis and global slowdown less than Dubai.

Emirates Steel plans to spend $1bn over the next year or two to buy steel production facilities in the Gulf Arab region, Nowais said.

It would also enter into partnerships with other companies for production of steel pellets and hoped to have a partnership in place in the third quarter, he added.

Emirates Steel plans to boost capacity to 3 million tonnes in 2011 and to 6 million tonnes by 2014, Nowais said.

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