Font Size

- Aa +

Mon 28 Jun 2010 01:07 PM

Font Size

- Aa +

Weak Gulf steel demand could lead to oversupply

Traders warn prices fall further in the coming weeks as construction remains slow.

Weak Gulf steel demand could lead to oversupply
STEEL PRICE: Steel billet held steady last week at around $430 a tonne compared to $420 a week earlier. (Getty Images)

Weak steel demand in the Gulf region might lead to oversupply in the market forcing prices to fall further in the coming weeks, steel traders said on Monday.

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, the chief executive of Oman-based Jazeera Steel.

Steel billet, which is used in making rebars for construction, held steady last week at around $430 a tonne compared to $420 a week earlier.

But some traders believe that the price could tumble in the weeks ahead as a seasonal slowdown is seen knocking down demand in key consuming areas such as the Middle East and North Africa.

Economic activity in the Gulf region tends to subside during the Muslim 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 B.S. Shetty, commercial manager of 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 added. (Reuters)

For all the latest UAE news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.