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Wed 2 Sep 2020 09:59 AM

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How UAE steel firms have benefited from Covid supply chain concerns

Global steel production has dropped 7 percent on the back of global pandemic

How UAE steel firms have benefited from Covid supply chain concerns

Global steel market is estimated to reach 1.6 billion metric tons by 2027, according to industry reports.

Fear of supply chain delays as a result of the Covid-19 global pandemic has boosted the region’s steel sector.

The industry has suffered much like many others as a result of border closures and movement restrictions.

However, in the Middle East, that has meant regional companies have benefited as buyers look to shorten the supply chain to ensure delivery.

Joseph Chidiac, general manager of Emirates Building Systems (EBS), a subsidiary of Dubai Investments, told Arabian Business: “As coronavirus was spreading, EBS was awarded new contracts for projects locally and across the region. These orders which were placed and supposed to be placed with companies outside UAE, were cancelled and awarded to EBS as customers were afraid about the delay in materials supply, disruptions in logistics and the lockdown in these countries, which were having implications on the projects’ schedules.”

Chidiac said that he believed that local and regional sourcing of materials helped to improve competitiveness, meet project timelines and ensure on-time delivery of projects.

“Bulk purchases well in advance of project schedules was a major advantage that helped us mitigate the risks and navigate smoothly during these unprecedented times with zero cancelled orders or held projects,” he said.

The World Steel Association’s June 2020 report revealed that world crude steel production for the 64 countries reporting to the association stood at 148.3 million tonnes, reporting a seven percent drop compared to June 2019 on the back of the difficulties posed by Covid-19.

Localisation of the steel industry in the UAE

In the post-Covid-19 world, where several countries are looking at reducing supply chain disruptions, localising the supply of materials could help eliminate the necessity for travel and imports or exports.

“Given the potential challenges linked with the ongoing pandemic, we definitely see further localisation of not just the steel industry but almost every industry. As in the long run, it's best for every country to be self-sufficient, so it’s good that we have a local manufacturing facility and the UAE government is doing a lot in terms of supporting the local industries,” said Ruchi Dana, board member of Dana Group.

Meanwhile, Chidiac said that the Covid-19 pandemic provided “an opportunity” for the company to look and diversify options on its suppliers of materials. “The strength of the local market supplier has shown its resilience during the pandemic, providing an ideal option for us during these tough times,” he added.

Future outlook

According to industry reports, the global steel market is estimated to reach 1.6 billion metric tons by 2027.

Despite business being adversely affected by the pandemic, Chidiac believes that “in the short term, the outlook of the steel industry post Covid-19 pandemic will be adjusted to meet the new market requirements, which will regain more resilience and will move fast”.

“The market will be changing into a more sensible market where medium sized, and competitive players, quickly adopting to clients and market needs, would seek an upper hand,” he said, adding that EBS is looking to explore and expand into new markets in the GCC and the MENA region.

According to Chidiac, Q4 will provide more visibility in terms of the post-Covid-19 growth and impact.

Ankur Dana, CEO of Dana Steel, on the other hand, expects to see a drop in steel prices, although not significant.

He told Arabian Business ​that the closure of borders due to the pandemic created an artificial demand for steel in certain regions, while an oversupply in others. “We previously saw a lot of consolidation in the steel industry and we see that would be the trend going forward as well. [While] the current outlook of the steel industry is a bit uncertain, the future looks positive and we are optimistic,” said Dana.

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