Dubai – Demand for steel in Egypt is expected to grow by 4% during 2020, driven by new projects, improvement in private consumption, and disposal of steel surplus accumulated in 2019 estimated at 700,000 tonnes, said George Matta, chairperson of the Economic Committee of the Arab Iron and Steel Union (AISU).
Matta was a speaker at the Middle East Iron and Steel Conference in Dubai on 10-11 December which witnessed the participation of several major steel companies in the Middle East, such as Emirates Steel, SABIC Steel, and some Egyptian companies, notably Ezz Steel.
He explained that the demand for steel decreased by 6% in 2018, but has improved in the second half of the year with the acceleration of implementing major projects, such as the New Administrative Capital and New Alamein cities, new metro lines, etc.
The committee’s report – of which Daily News Egypt obtained a copy – revealed that with the imposition of protectionist fees approved by the government and the reduction of gas prices, the demand on steel increased and steel companies’ stocks declined to lowest levels. The report predicts consumption to reach 9.9m tonnes in 2020, growing 4%.
The report expected that Egypt, the largest consumer of steel in the Middle East and North Africa (MENA), would lead economic growth in the region, noting that despite the recovery of gas, tourism, wholesale trade, real estate, and construction sectors, the past period witnessed a recession in the steel market.
Steel related stocks rose to its highest levels as a result of low price of imported steel and low liquidity, which negatively affected local factories, and led the steel market to shrink during the first half of this year by about 6% compared to the same period last year.
With regard to the MENA region, Matta said that the steel consumption is expected to reach 40m tonnes by the end of this year and 41m tonnes by the end of 2020, marking a decline of about 7% from the previous year, which recorded 43m tonnes.
The report attributed the decline in consumption in the MENA region to the significant contraction in the steel market in the Gulf Cooperation Council by 8%, in addition to the decline in oil prices, and the failure to start reconstruction projects in Syria and Iraq alongside continued military operations in Syria and Yemen, as well as political instability in some other countries.
Matta expected 2% steel consumption growth, an increase of about 1m tonne over this year’s estimates, including 34.1m tonnes of rebar and steel sectors, and 7m tonnes of hot rolled steel plate.
Moreover, the Dubai conference will discuss the challenges faced by the steel industry in the Middle East and the concerns over expected slow growth in the industry in 2020 due to its exposure to several challenges.
The AISU was founded in Algeria in 1971 as the first qualitative Arab union to be concerned with the development of the Arab iron and steel industry. It consists of 89 member companies from 15 Arab countries. It is a non-governmental organisation with a private entity that has no political or commercial affiliation.
Saeed Ghumran Al Remeithi, CEO of Emirates Steel, said at the opening session of the conference that this year’s edition is taking place at a difficult time for global steel markets. He believes that over the past two years, several countries have adopted some protective measures to preserve their domestic steel industry
However, the Arab markets are witnessing significant reconstruction and building processes that are driving the growth in demand for steel, especially the Egyptian market, where important projects are being established.
Hassan Shashaa, chief operating officer at Emirates Steel, said that the increase in raw material prices by 32%, especially pellets, as a result of global trade wars, especially the protectionist war of wars between the United States and a number of countries in the world, that caused an increase in costs.
He believes that those challenges are killing the steel industry and investments in it, expecting the crisis to continue during the next year.
Shashaa expected that growth in the steel industry in developing countries will decrease by 0.4% during the next year.
He added that the main problem facing the steel industry is that there is a surplus in supply as a result of countries’ protectionist measures, noting that 2019 saw an increase in steel demand by 2.5%, but the result of an expected trade war will decrease demand in 2020.
He explained that the solution is to diversify target markets instead of relying on traditional ones, for example, the Iraqi market now needs huge quantities of steel for reconstruction.
Ravi Singh, chief executive officer of SULB Company, said that during the past 15 years, there has been an increase in demand by 85% and that despite this there have been fluctuations in prices by 30-50%.
Marwan Al-Mojil, executive commercial director of Long Products at SABIC, said that the surplus in production and trade wars were the most prominent challenges during 2019, in addition to the decline in steel prices by about 15-20%, as the Gulf countries were the favourable destination in the world as they do not have protection fees or tariffs on steel as in most markets.