Middle East & North Africa (MENA) on the way to be a major hub for the steel industry
The Middle East and North African steel markets have never been as commercially significant as they are today – strong oil revenues, a growing manufacturing and consumer bases as well as strong economic performance indicators are combining to push steel consumption sharply higher over the last three years. The longer term outlook for the Middle East steel market is promising, as the world moves out of recession and confidence begins to fuel economic growth and capital investment, but in the long-term demand will be centred on North Africa and the Persian Gulf markets.
The development of the steel industry in the region has been connected with the recent surge in economic prosperity. For instance, much of the revenues resulting from high oil prices in recent years have been directed towards investing in and setting up steel projects. Improvements in the price of steel have also encouraged investment in this sector. In addition, the industry has had a guaranteed return, and its export capabilities – as well as its ability to satisfy the increasing needs of domestic markets – mean it has been a very attractive investment.
Despite the recent downturn in the region due to the wave of political uprisings known as the Arab Spring swept across the Middle East and North Africa (MENA) region, the fundamentals for the iron and steel market remain strong, and analysts are confident that steel demand will rebound in the medium – long term; The supply-demand imbalance between finished steel output and apparent consumption in the Middle East & North Africa (MENA) region is expected to widen in the next few years. MENA’s apparent steel consumption will be growing in the upcoming 5 years.
The steel consumption in the MENA is expected to exceed 50 million tons (per year) because of the construction upturn and the infrastructure projects witnessed by the majority of the Arab countries, on one hand, and in spite of the fact that the year of 2011 had seen turbulent political situations in the Arab world accompanies with impacts which have affected the industry, in general, and the Arab steel industry, in particular. This has resulted in the stop of a number of production lines in some companies, such as the Libyan Iron and Steel Company or in curbing their production due to the reduced demand for the steel product locally or due to the problem of logistics connected with the inputs and outputs of this industry, which has affected the export operations in these countries. However, the experts see that there are illuminated signs on the path of this industry in the Arab world, as the Arab steel industry has become experiences in coping with what gets in its way by the surrounding circumstances. A number of companies have achieved great successes in this field and they are going on in developing themselves and their performance on a permanent basis. Indicators thereof are many during 2012 and the coming years.
The Arab steel industry is taking up the direction of reinforcing its strength and the new governments provide important opportunities for economic reform towards development of core infrastructure such as power, airports, railways, etc.; early indications of revival in industrial sector and probable shift in preference from concrete towards steel structures in the buildings segment, the structural steel demand in the region is likely to be robust over next few years. Therefore, it forecast a 20 percent gradually increase in business from this sector in 2013 versus 2011, due to the stable political situation in Arab region and Egypt in particular, also the economic situation in Europe.
The temporary postponement of investment and consumption decisions will start to be implementing as the Arab Spring offers great opportunities in countries such as Egypt, Tunisia, Morocco, and Jordan, which have begun to undertake significant political reforms which affects on the economic performance.
Facts and figures:
SABIC has declared that the new steel production unit whose production capacity amounts to one million tons of billets per year will start up by 2012 to provide the Saudi Arabian market with different steel products. After putting this unit into operation, the company’s production capacity will come up to 6.5 million tons per year, and production of long steel products will be 3.8 million tons per year.
The Egyptian Iron and Steel Company has set an investment plan to get a 20% share in the steel market of Egypt by 2012 in order to reach a production of 2 million tons (per year).
Emirates Steel Company which is one of the companies of the Public Holding Company has also declared putting into operation of the first rolling mill of the heavy construction sections in the Middle east under an Emirates management.
The Executive President of al-Rajihi Steel, Eng. Mahdi al-Qahtani, has revealed the nearing of putting into operation of the rolling mill expected to be put into the commercial production next April of this year, declaring that the preparation operations are now in their final phases.
Qatar Steel will upgrade the steel mill in Mesaeed in order to increase the billets production capacity by 30%. Expansions will include importing an electric arc furnace with a 95 tons capacity and a ladle furnace with also a 95 tons capacity from Siemens Company in addition to a unit containing six billet continuous casting lines.
The Gulf Industrial Investment Company in Bahrain has also signed a contract with some crude steel production companies in Canada to supply the company with about 7 million tons of crude steel until 2014.
Janada Shdeed Company in Oman Sultanate has also inaugurated its direct reduction iron with a production capacity of 1.5 million tons per year. The company also plans to add an electric arc furnace, a ldle furnace and a continuous casting machine at the second stage at a cost of about 200 million dollars. The company expects to have this project completed by 2013.
A boom in construction and infrastructure spending will help drive an estimated 36 percent increase in Egypt’s production of reinforcing steel by 2017 according to the Egyptian Chamber of Metallurgical Industries.
Forecasting figures predict a total of $4.3trn will be invested in construction projects across the MENA region by 2020, representing an increase of almost 80% from today’s spend.
With all eyes on the Middle East, it has great potential to develop their manufacturing industry. High economic growth rates and energy existing will also represent an opportunity for those investing in increasing production in the region’s steel sectors, and lead to a surge in demand for machinery, equipment and consumables needed by steel, making The Middle East as one of the most open and attractive world markets for a number of big international steel players.