Steel prices in the UAE, which have seen an increase from December to March, are showing a growth pattern that is benefiting the regional market in terms of its implications on the capacity of mills to operate at full capacity, said a report.

Danube Building Materials, the leader in construction, building materials and shop fitting industries, further revealed that scrap prices continue to firm up, costs of raw materials steadily increase, and billet availability is constrained.

Further price hikes are likely in the coming months, thereby prompting local steel suppliers to strongly reinforce their presence in the regional market, the report said.

The steady price hike in the region, however, is not in tandem with the steep levels by which global steel prices are rising, which is a reflection that the steel market in the region is becoming indifferent to global market forces and thus continues to have a significant lag behind price surges in other parts of the world.

The price of steel in the UAE started its recent climb from a rate of Dh1,780 ($484.67) per tonne in November-December 2009, to Dh1,850 in January, to Dh1,950 in February, and to its present rate of Dh2,150 per tonne.

Comparatively, global steel (mill) prices have gone from $490 (December 2009) to USD $520 (January) to $535 (February) to $570 (March), and latest estimates reveal that a price of $600 is imminent, the report said.

The region’s indifference to the rate of increase seen in global prices is partly due to weak demand, as a result of some major projects in the Middle East being delayed or put on hold.

Furthermore, liquidity in payment remains tough, with most contractors and developers unable to commit to immediate payments for suppliers in the region.

“The local steel market required up to 400,000 tonnes of steel per month in the years prior to the recession but this has reduced to 250,000 tonnes per month on account of the international economic downturn,” said Rizwan Sajan, Chairman, Danube Building Materials.

“The increasing role played by GCC-based steel suppliers, which has curbed the flow of Turkish steel into the country, is also an indicator of the increasing growth potential for the regional steel industry,” he added.

“We remain optimistic that steel prices in the region will increase to reach its ideal level, which is somewhere around Dh2,300 - 2,400 per tonne, and this will provide a boost to the mills, which have been affected by the recession to gain full operation capacity and thereby stabilise the market.”

“The global market has seen steel prices drop to an all-time low of $390 back in 2008, while prices in the region had hit the bottom price of Dh1,750 per tonne in 2009,” Sajan continued.

“During these periods, the steel industry has had major difficulties coping with the closure or slowing down of mills. The increase in prices we are monitoring in the UAE and the rest of the region is suggestive of positive developments in the stability of the steel industry, and we are watching for further indicators to help us leverage this excellent progress,” concluded Sajan. – TradeArabia News Service