UAE Steel Trade Losses Hit Dh3 Billion

DUBAI — The United Arab Emirates’ steel trade has suffered an estimated loss of up to Dh3 billion as prices went on a tailspin from Dh6,000 to Dh1,800 per tonne over the past few weeks, market sources said.

By Issac John

Published: Sat 6 Dec 2008, 12:53 AM

Last updated: Sun 5 Apr 2015, 11:20 AM

The woes of the trade were exacerbated by a supply glut resulting in the stockpiling of more than two million tonnes in the wake of unbridled imports by speculative and unconventional traders who entered the market lured by the prospects of quick profits as steel prices went on a relentless rally in the first seven months of the year to peak at Dh6,000 per tonne in July.

A steep 70 per cent drop in steel prices since July to bottom at Dh1,800 in October rendered a heavy blow to the speculative traders, also known as document traders, who had entered the scene only weeks before the dramatic price fall, market sources said.

“With stocks piling up, prices sharply dropping and demand slowing, the speculative traders — who, unlike regular traders, have no infrastructure facilities including yards, cranes and trailers to keep physical stocks — got into a Catch-22 situation. Those document traders who have been used to selling on high seas or at ports were forced to dump their stocks at rock-bottom prices or end up paying demurrage of Dh20 per tonne per day,” said a traditional steel stockist who also lost heavily.

Most regular steel traders had made a bonanza as steel prices rallied in the first half of 2008.

“With prices rising every week, they made a good harvest. Allured by the windfall, scores of businessmen from other trade segments including textiles, also rushed in to import huge quantities of steel, hoping to sell it on high seas. But when prices started to crash as steel producers across the region continued to cut rates following a slow down in demand, importers were forced to stockpile steel shipments at ports or makeshift warehouses. At one time, steel stocks in the UAE surged to more than two million tonnes, more than six times the monthly demand of 400,000 to 450,000 tonnes,” said an importer who also requested to remain identified.

While most traders expect steel prices to fall further as the supply continues to exceed demand, Shyam Bhatia, Chairman of Alam Steel, a leading stockist, said sales volumes improved by 20 per cent in November compared to October.

“Prices have risen 15 per cent to Dh2,200 per tonne delivered to site. We believe demand for steel in 2009 will be about 15 per cent lower than 2008 figures. A good rough calculation would be to take 2007 consumption as the expected demand for 2009. Projects that have already commenced will be completed,” Bhatia said.

Rizwan Sajan, chairman of Danube, a leading building material supplier, said only a section of the trade, which had been prudently handling their stocks with a network of supply outlets, could weather the crisis resulting from excess stocks and price plunge.

“When prices dropped, only a few stockists were able to take advantage by re-booking new shipments,” he said.

The UAE’s per capita consumption of steel at 2,348 kilogrammes is the highest in the GCC followed by Qatar at 985 kilogrammes.

The GCC as a whole has a per capita average consumption of 645 kilogrammes, which is higher than the world average of around 240 kilogrammes, according a research group, Global Investment House.

The annual demand for rebar in the GCC is an estimated 13 million tonnes, of which 40 per cent is met regionally and the rest imported mainly from Turkey, North Africa and CIS countries.

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