Middle East steel industry set for dramatic growth

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The report investigates the activities and plans of the region's leading raw steel producers and their place in the global market, as well as looking at price and demand trends.

MEED's Middle East Steel 2008 report reveals that, despite only accounting for two per cent of the global steel trade, the Middle East steel industry is undergoing rapid expansion to meet the needs of the fast expanding construction sector. The Middle East produced 21.1 million tonnes of raw steel in 2006 and consumed 41.6 million tonnes of finished goods. This is forecast to rise to 35 million tonnes of production and 60 million tonnes of finished goods by 2010.

Peter Shaw-Smith, Senior Writer, Research and Information, MEED writes:

'High oil incomes, coupled with major changes to real estate and mortgage laws, have fuelled a construction boom, with developers scrambling to bring on fresh supply. This is causing a backlog in the projects market, where strains are being placed on contractor capacity and building materials supplies. Unsurprisingly against this backdrop, steel prices have been volatile.'

The growth of the projects market is also a bullish indicator for the steel industry, the report says. 'According to MEED Projects, projects worth $2 trillion are planned or under way in the Gulf, with less than one quarter already awarded. The regional steel trade stands to make about $50bn from projects currently under way and an additional $150bn in the coming years from new schemes in the pipeline.'

Further key insights from the report reveal:

Rebar prices went through the $1000 a tonne barrier in late March 2008. They shot up from $600 a tonne to well above $800 a tonne in the three months to end-January 2008, reflecting the huge demand for long products from the booming construction industry.

Traders report that regional market conditions remain highly volatile and unpredictable, in keeping with global commodities markets.

The rise of China as a steel powerhouse, producing one third of the world's raw steel, is not expected to destabilise other markets - barring the unlikely removal by Beijing of export controls. China also faces ore supply challenges, putting further upward pressure on global ore prices while encouraging the country to continue stockpiling resources for infrastructure development.

With Iran troubled by tension with the West, Saudi Arabia is the only country in the region in a position to substantially ramp up production to meet the strong regional demand. Egypt is the region's other major player, but exports little to the GCC.

MEED's Middle East Steel 2008 report is the latest in a series of GCC and Middle

East sector reports intended to give an introduction to the regional steel industry, particularly for project financiers, investors, consumers and contractors.