The Middle Eastern market’s sob story seems unending. The market has remained acutely reticent in the post recessionary era. Although other regions in the globe faced undulations exhibiting activity in every phase the homogeneity of inactivity in gulf region has made the operators fatalistic.
The back breaking impact of recession has left the construction sector in tatters which is yet groping to restore any semblance of order. In the heydays SME’s had been the paradigm of investment in Middle East attracting big capital investments. However in the post recessionary era the inflow has dried up living the turf barren.
UAE typically has an annual demand of 2.5 million tonnes of rebar. With an installed capacity of 4.5 million tonnes ideally the market should be plush with the material. However the recessionary morass has left the mills reeling with an abysmal production of 1.5 million tonnes only leaving the ground veritable for imports. Since the apparent demand has been groveling at a pitiable level there has been barely any imports taking place to cater to the average demand.
A genesis of the post recessionary price movements throws some interesting facts. The prices which had reached a nadir of AED 1600 per tonne EXW in beginning of 2009 gradually crept to a level of AED 2700 per tonne in February 2011. However the absolute inactivity over the past couple of months led decline touching AED 2470 per tonne.
The current ex-wks levels are AED 2470 per tonne for cash purchase and AED 2500 per tonne to AED 2525 per tonne for credit sales (120 days).
The Middle Eastern economy is typically beset with a surplus houses. At the same time the sudden tizzy in oil prices in the aftermath of MENA crisis particularly Libya touching USD 122 per barrel made uncertainty prevalent as the levels are undoubtedly un sustainable and speculative.
The market seems to have gone in a huddle apprehensive of the bubble burst accentuating their misery. Resultantly capital inflow and new projects have been stemmed perpetuating impasse. With the political crisis taking epidemic proportions touching Syria, Morocco, Bahrain etc buyers have prudently opted for a wait and watch policy letting the dust to settle. In the meanwhile the buying is skeletal to cater to the immediate requirements.
It is learnt Turkish mills are offering rebars at USD 660 per tonne to USD 680 per tonne CNF, Dubai with no response. The wings have been further clipped with decline of USD 20 per tonne in scrap levels over the week.
Undeniably billet prices have shown resilience during the last week by USD 10 per tonne to USD 20 per tonne but it seems to be a flash in the pan. It has become a game of up brinkmanship wherein the buyer and the seller want to play on each other nerve to the hilt and whosoever is needy bulks first. Suck scattered and non-uniform pattern cannot be a trendsetter but certainly creates ripples for a couple of days.
In summation not much activity is expected at least till July as the summer picks up and Ramadan approaches in July. One can expect some respite post Ramadan only.
( Source: www.steelguru.com )