Gulf News reported that stability is returning to the region's construction sector as continuing investment in infrastructure projects accelerates economic recovery. This will raise demand for steel and steel products.
Mr Gregor Munstermann CEO of Abu Dhabi based Emirates Steel said that the estimated USD 60 billion to USD 70 billion that Qatar will invest in infrastructure projects as it prepares to host the FIFA World Cup in 2022 will also contribute to lifting demand for steel in the region.
He added that other factors that are expected to fuel demand are increase in population and sustained oil and gas revenues that will ensure investment in infrastructure building continues.
Mr Munstermann said that at 42% of consumption, the construction industry remains the largest driver of steel demand. Oil and gas projects provide 20% of the demand and infrastructure projects account for 17.5%. The petrochemicals, power and refining sectors make up the remaining demand.
According to Mr Sharad Mahendra VP at JSW Steel, although the Middle East will produce 25 million tonnes of steel in 2011, it will continue to be a net importer. The highest demand growth for steel is coming from emerging nations' investments in urbanization while the advanced economies have seen demand saturation.
Mr Munstermann said that as the mining industry moves from annual pricing to rates set on a quarterly basis, cost control strategies will become paramount for Middle East steel producers to remain competitive. He added that "The end of the annual pricing mechanism for iron ore has led to increased volatility. Quarterly pricing and a steep increase in raw material prices has put pressure on margins."