Hike May Hit Dubai Construction Industry
Steel traders in the United Arab Emirates are said to have been hit by the upturn in steel prices.
The regional financial newspaper, Emirates Business, claims that steel traders are being forced to buy steel at high prices and sell it at lower prices to honour contracts made a year ago, when steel prices were much lower and based on lower iron ore input costs.
The newspaper quotes Rizwan Sajan, Chairman of Danube Building Materials, as saying the steel price has gone up by almost 30 per cent across the Gulf Co-operation Council (GCC) states over the last couple of weeks. The price for a tonne of steel is Dh3,000 in the UAE, RO320 per tonne in Oman and BD300 per tonne in Bahrain.
"This sudden, unexpected price hike is a further blow to steel traders. On one hand, we have orders from customers at very low rates while on the other, our present procurement rates from steel mills abroad are high. We are taking positions at $720 (Dh2,644) per tonne and we are not sure what domestic steel prices will be when these orders eventually arrive here," he said.
"Most players in GCC steel markets – the steel mills, traders and the end users – have been caught on the wrong foot as they failed to anticipate that steel prices would gain momentum in this fashion. Since domestic demand was weak, people were under the impression that there was no scope for a surge in steel prices."
After the UAE was hit last year by the fallout from the global financial crisis the domestic steel price in the Emirates is lower than in other Middle Eastern countries such as Syria, Iran, Libya and Egypt.. In the short-term, the high international steel price will adversely affect local contractors, who are trying to recover after the Dubai World debt settlement.
Although Mr Sajan expects a price correction in due course he says it is impossible to predict by how much. All players in the steel supply chain were working on minimum stocks and there is a shortage in the market.
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