Turkey, the largest steel exporter to the UAE yesterday increased prices by more than 50 per cent, resulting in a marginal hike in local prices.
Steel prices in the UAE yesterday went up to Dh2,200 after falling to an all-time low of Dh1,800 last weekend.
Traders in Dubai yesterday welcomed the price correction and told Emirates Business the trend could continue for some time and put an end to the "ridiculously low prices in October, that resulted in serious losses to many of them.
Turkey had on Saturday increased prices by $50 and continued the trend with a massive increase of almost $200 during the last two days. "Turkish mills are selling at $600 per tonne compared to $400 last week. They are saying the increase has become mandatory following a hike in the prices of scrap," said Shyam Bhatia of Alam Steel.
Steel prices in the UAE had skyrocketed to touch Dh6,000 in July. It started to slide starting from August following massive imports by new entrants into the steel trading business. Prices fell further in October following a sudden slump in demand across the world and the GCC.
According to experts UAE traders have lost terribly and the marginal increase, if sustained, will provide a breathing space.
Sameh Hassan, CEO of Madar Holding, a subsidiary of Saudi Arabia based Al Fozan Group said most traders who purchased stocks when prices per tonne was around Dh4,000 continued to suffer major financial losses. "The traders are still suffering. They are now selling stocks they brought for Dh40,00 plus at Dh2,200. People are still losing almost 40 per cent of their investments," said Hassan.
"Happy days are here again. We hope steel prices will start going up again," said a leading trader.
According to estimates, steel prices will fluctuate further and finally stabilise at around Dh2,500 during the following few months.
Rizwan Sajan, Chairman, Danube Building Materials, said most UAE traders have already revised their prices. "The bigger traders have fixed the price between Dh2,100 to Dh2,200. Although Turkey has increased prices, it will take at least another month for the hike to exactly reflect in the UAE local market. We have excess steel that will last for another month," said Sajan. Because traders are loosing money, they will go slow on trading, he said.
Several factors, he said, will influence the future trend. "Most importantly demand will continue to determine the price structure, followed by the production levels of mills," said Sajan.
Demand in the GCC will continue to remain stable, as orders from most ongoing projects will continue as usual. "We are not sure about new projects, but there are enough and more existing projects that will call for a regular supply," said another senior trader.
According to Hassan, globally no one is anticipating an increase in demand. "The global financial crisis has affected the property and construction industry badly. Even if there is no demand the rock-bottom price that we witnessed of late was not acceptable," said Hassan.
New markets such as Iraq and Iran would be a major boost for steel producers. According to sources, one particular supplier has got a major order from Iraq for 50,000 tonnes.
Even when the prices went down, there was no major surge in demand, said Hassan. "I have not seen any major purchases. Maybe people were expecting to fall further. But now when it has started to move up there are buyers coming in," he added.
Steel at the end of the day he said is not a major component in the construction industry.
"It is just seven per cent of the construction cost. The whole noise, in terms of steel price having an impact on project is unwarranted. It has far less impact compared to cement," he said.
Several mills have meanwhile cut production in an effort to stabilise prices.
Globally Arcelor Mittal has reduced production by 25 per cent while Tata has cut by 30 per cent.
Turkey has cut the largest with almost 40 per cent. According to experts even Chinese steel exports to the Gulf has reduced as it is no more economical.
Several experts also disagreed reports that Turkey would stop exporting steel to the Gulf.
"They have already lost the market in the UK and the rest o the Europe. Although prices of steel in Turkey has marginally increased, the country"s production far exceeds that of the local needs and cannot do without the GCC market," said Bhatia.