Dubai: The price of steel is expected to decline further in the first quarter of this year, according to industry officials.
A global slowdown in industrial activity, along with a stockpile in inventory, will put a downward pressure on prices, they said.
Statistics show that prices have increased slightly from November to January.
According to Mesteel.com, an online steel tracker which analyses Middle East markets, the price of reinforcement bars, the main material used for construction projects, was at $760 (Dh2,789) in January last year, rising to an astounding $1,540 (Dh5,651) in July and then dipping to $440 (Dh1,614) by November. As of January 2009, the cost of reinforcement bars is at $485 (Dh1,779).
Karel Costenoble, general manager of MeSteel.com, said steel prices will remain the same or may go down in the next two quarters.
He said the demand for steel worldwide has declined except in China, where prices are slightly higher. He believes the number of construction projects in the UAE will decline by half this year.
Rizwan Sajan, chairman of Danube Building Materials, a leading player in the UAE"s building materials supply industry, said he did not expect any major fluctuation in steel prices in the next three to six months.
However, Sajan said despite volatility in steel prices last year, 2009 can be a good year for construction companies, who can take advantage of lower steel prices.
"All building materials have gone down and this can be a good year for them to buy commodities at cheaper prices" he said.
He hopes construction companies will continue projects till 2010.
But Riad Bsaibes, the chief operating officer with Amana Contracting and Steel buildings, a company focusing on construction of industrial and commercial projects across the GCC, disagreed.
Bsaibes said that even though construction companies can take advantage of lower material prices, the effects of the credit crisis will eventually determine whether construction projects will move forward.
"Even if you are getting a great discount, if you don"t have cash, things don"t go forward. The ability to access funding for projects is very important," he said.
He said this year will be a less volatile one for the steel industry, but prices will continue to decline in the first quarter of 2009.
Bsaibes attributed this to two reasons: "A global slowdown in global activity, along with a stock pile in inventory will put downward pressure on prices."
He said the main drivers for the steel industry will be the continued consumption of inventory locally and increased activity of the construction industry worldwide driven by stimulus packages announced by the US, China and EU.
Bsaibes said having more steel mills in the region would help restore the industry back to normal levels.
"The region has been a net importer and prices have been influenced by the global supply and demand."
According to Bsaibes, local companies will be less affected by the worldwide recession.