Khaleez Times reported that the United Arab Emirates’ steel trade has suffered an estimated loss of up to AED 3 billion as prices went on a tailspin from AED 6,000 to AED 1,800 per tonne over the past few months.
According to market sources, the woes of the trade were exacerbated by a supply glut resulting in the stockpiling of more than 2 million tonnes in the wake of unbridled imports by speculative and unconventional traders who entered the market lured by the prospects of quick profits as steel prices went on a relentless rally in the first seven months of the year to peak at AED 6,000 per tonne in July.
The market source said that a steep 70% drop in steel prices since July to bottom at AED 1,800 in October rendered a heavy blow to the speculative traders.
A traditional steel stockiest said that “With stocks piling up, prices sharply dropping and demand slowing, the speculative traders who, unlike regular traders, have no infrastructure facilities including yards, cranes and trailers to keep physical stocks got into a Catch-22 situation. Those document traders who have been used to selling on high seas or at ports were forced to dump their stocks at rock-bottom prices or end up paying demurrage of Dh20 per tonne per day.”’
An importer said that “With prices rising every week, they made a good harvest. Allured by the windfall, scores of businessmen from other trade segments including textiles, also rushed in to import huge quantities of steel, hoping to sell it on high seas. But when prices started to crash as steel producers across the region continued to cut rates following a slow down in demand, importers were forced to stockpile steel shipments at ports or makeshift warehouses. At one time, steel stocks in the UAE surged to more than two million tonnes, more than six times the monthly demand of 400,000 to 450,000 tonnes.”
Mr Shyam Bhatia chairman of Alam Steel said that while most traders expect steel prices to fall further as the supply continues to exceed demand, sales volumes improved by 20% in November compared to October. He said that “Prices have risen 15% to AED 2,200 per tonne delivered to site. We believe demand for steel in 2009 will be about 15% lower than 2008 figures. A good rough calculation would be to take 2007 consumption as the expected demand for 2009. Projects that have already commenced will be completed.”
Mr Rizwan Sajan chairman of Danube said that only a section of the trade, which had been prudently handling their stocks with a network of supply outlets, could weather the crisis resulting from excess stocks and price plunge.