Unlike US and EU where steelmakers finish the year generally on a major note, recession in Middle East market is going on. Demand for flat steel products stabilized recent days at low level as well as demand. The cost of Russian hot rolled steel in Turkey, Iran, and other countries of the region makes averagely $ 550-560 CFR per tone with delivery in January-February, cold rolled steel for $ 630-640 per tone CFR. Ukrainian companies offer hot rolled steel for $ 515-540 per tone CFR, but cold rolled coils go on the same level with Russian material.
Egyptian EZDK has put March quotations for hot rolled coils for Middle East countries at the level of $ 585-590 per tone FOB, but here it probably comes from general international expectations for flat steel prices growth in the beginning of 2010 rather then from any regional specific factors. Vice versa, the majority of experts are agreed with each other that while the first quarter of the next year demand for flat steel in Middle East will be relatively low, and even further on hopes placed only for Turkey.
However, situation in the regional long product market is even more cheerless. By some estimates, rebar consumption in UAE in 2009 has reduced more than twice in comparison with the previous year, considerable recession is observed also in other countries of Gulf region, except Iraq only. The perspectives for the first half of 2010 are rather unclear. Now it’s obvious that the governments of oil-producing countries are not going to open credits for large construction projects unless they will be sure in stability of international oil prices. These prices stayed merely all December at the mark of $ 70 which lets the countries to balance budgets but lefts merely no financial surplus.
However from the other side the governments of the Gulf countries are likely to support their construction industry by investments which provides jobs not only for migrant workers but local citizens too. That is why it is possible to assume that demand for construction steel in 2010 exceed current year’s level by 10-15%. However, recover is likely to be slow. Demand in North Africa is expected to be more active, but there will be hardly a buying craze of March-April 2009 when mass purchases of rebar in Egypt led to price hike of more than $ 100 per tone during a month. The lesson has been learned.
During recent weeks the local prices for rebar in Middle East countries are relatively stable. In UAE local companies offer it for $ 490-500/t delivered, in other countries which are large importers of rebar (Egypt, Iran, Saudi Arabia, Syria) the prices are varying between $ 520/t and $ 550/t from a steel yard (without taxes).
However, Turkish companies have raised their local and export prices for rebar approximately by $ 10/t. At local market a middle sized material is offered for $ 480-490/t EXW (without VAT), quotations for foreign buyers reach $ 490-495/t FOB. But the consumers consider these prices overrated, so there are few deals.
Turkish steelmakers are forced to hike prices first of all by expensive scrap. The cost of US HMS1&2 material reaches $ 320-325/t CFR, while purchases of European and Russian scrap are made mainly for $ 310-315/t CFR, but everybody has no doubt in further coming price increase. Bad weather in Europe and North America led to significant reduction in scrap collecting and growth of its cost “on the ground”. In USA the prices are expected to grow by $ 40 per tone in January, so exporters will try to increase their quotations to $ 350/t CFR Turkey and over.
In the current situation it is practically unreal to make adequate increase in price for rebar. That is why Turkish companies reduce production. According to World Steel Association data, steel smelting in Turkey in November fell to 2.14 m tons against 2.28 m tons in October, but December figure is likely to be even less than 2 million. Several companies reduced loading of capacities by 30% and more.
However, reduction in usage of expensive scrap means increasing in demand for billets. Due to that fact, the CIS suppliers have got an opportunity to increase quotations. Yet the cost of Russian and Ukrainian billets is held at the level of $ 415-420/t FOB but some companies have succeeded to sign contracts for January for $ 430/t FOB and over.