/Rusmet.ru, Victor Tarnavskiy/ New year did not bring significant changes in Middle East steel market. In most countries of the region domestic prices for rebar in January remained the same as in December. An increase was noticed in Egypt only, whereas in Iran, UAE, and Syria the quotations of local suppliers somewhat decreased. The demand was low as earlier, so that manufacturers and distributors underwent sales problems.
However, Turkish metallurgical companies had to continue rebar prices increase started in December due to further scrap prices increase. Reduction of scrap collecting due to whether conditions deterioration in America and in Europe and demand activation from local mills caused domestic prices growth on both costs of Atlantic Ocean. Accordingly the quotations for American and British HMS № 1&2 scrap increased from about $320 per ton CFR Turkey to $340 per ton CFR and even more. At that Turkish metallurgical companies can not withdraw from new purchases, since during several weeks before New Year they used stockpiles of imported material; the stockpiles have run out by now.
In the beginning of January Turkish rebar prices delivered to Middle East countries grew to $510-520 per ton CFR comparing with about $500 per ton in the second half of December. Late quotations were at the level of $500-510 per ton FOB. This is significantly higher than many consumers can pay having agreed for $500-510 per ton CFR.
Nevertheless the suppliers have no choice. Scrap prices in global market will probably remain high at least till the end of March. Their further increase looks more probable than the decrease. Metallurgists will have to increase their quotations accordingly.
This makes good conditions for semis prices increase. Russian and Ukrainian suppliers before New Year holidays offered semis to Turkey at $420-430 per ton FOB. But now the price is $430-440 per ton FOB. In Turkey domestic prices for semis have reached $460 per ton EXW excluding VAT.
However, prices increase, based on costs inflation only, can not be sustainable. As scrap pressure on the market declines, rebar prices will fall at once. At least small demand activation is necessary for more or less acceptable quotations level. However, in this regard regional market perspectives are rather positive.
The governments of UAE and Saudi Arabia announced new budgets for 2010, which foresees larger funds allocation for construction and infrastructure projects than last year. The growth of state investments for these purposes is provided in Egypt, Jordan, and Libya. In Iran the situation is more difficult, since there oil must cost $75 per barrel or more for budget balancing. In January oil quotation grew to more than $80 per barrel, but this is rather a temporary jump than a long-term tendency. In UAE rebar consumption in current year will obviously exceed the last-year figures, but will remain rather low, at least by $30-40 lower than it was before the crisis. The completion of the world highest sky-scrape, Burj Dubai construction has just emphasized that there are no comparable projects in the country, since they are not necessary. Financial difficulties, faced by Dubai last year, hurt its reputation of the main business center of the region.
The key role in Middle East rebar market was played last year by Egypt rather than Dubai. The supplies of Turkish rebar to Egypt grew by more than 7.5 times as compared with 2008 and reached 2.93 mio tons. This allowed the metallurgists covering the losses from acute decrease of export to other countries of the region. Egyptian government and private companies are planning further increase of construction and infrastructure projects in 2010. However, local mills complain that last year foreign suppliers got too much.
Egyptian Ministry of Industry and Trade accepts that rebar can be excluded from the free trade agreement between Turkey and Egypt. This bothers Turkish metallurgists. Such a decision can cause steel output decrease in Turkey and the growth of Egyptian scrap and semis import.
Middle East steel market creates the impression of squeezed spring. Local businessmen have new projects, but have no financing. At current volatile oil prices and without visible improvement in economic conditions of Western countries Middle East governments are likely to continue last-year careful policy. At least till spring the activity in construction industry in Middle east will likely to remain low. This means taht rebar prices level will be determined by, first of all, scrap prices delivered to Turkey.