Prices of steel in the UAE are continuing to register the sudden jumps that started early in March. Agents and contractors told Emirates Business that the price of a tonne reached Dh3,300 in Dubai and Dh3,000 in Abu Dhabi this week.
They attributed the rise to the disappearance of Turkish steel and shortage of supply of UAE and Qatari steel. Demand in Abu Dhabi has gone up because of new projects there, said these agents and contractors, adding that some traders have been manipulating the price rise.
Steel prices in the UAE had hit a high of Dh6,000 per tonne in March 2008, then crashed to Dh1,600 in August 2008, around the time when the global economic troubles first began to make themselves felt. Afterwards, they have been inching up all through 2009, only to suddenly zoom upwards in the first quarter of this year.
Emad Ahmed, Director of Ahmed Rashid Building Materials Trading, said prices in Dubai have been going up sharply since the beginning of the month. In February this year, the price of one tonne of UAE and Qatari steel was between Dh1,900 and Dh2,000. By mid-March, it jumped to Dh2,500. "The day before yesterday, we sold Qatari steel at Dh3,300 a tonne and yesterday we sold it at Dh3,200 to Dh3,150, while other agents sold it for Dh3,300," he said.
Ahmed attributed the increase mainly to the absence of affordable Turkish steel. Turkish steel prices went up by some $100 a tonne at the country of origin to hit $700 per tonne, which made imports next to impossible for UAE buyers. Traders who bought Turkish steel earlier have sold off their stock, as a result of which the market has no supply of it at present.
The shortage of UAE steel – especially that from the Emirates Steel Industries – came about as big Abu Dhabi contractors have cornered all the supply to finish their large projects, said Ahmed.
Ahmed said small building material and steel traders in Dubai have exploited the shortage of Turkish steel and hoarded large amounts of Qatari and UAE steel.
There is such a crunch that buyers are queuing up with cash to get their hands on some steel, said Ahmed. "Every day, agents of more than five building materials companies call and ask for UAE or Qatari steel for Dh3,000 and Dh3,100 in cash – a rare thing earlier. It is evident that there is a rush in Dubai to buy steel in anticipation of a further price rise," he said.
However, he warned, the hoarders will not have it so good in the near future. As domestic steel prices hit the roof, Turkish steel will again begin to look attractive, even at $700 a tonne. And if Turkish steel imports resume, the competition will force the UAE and Qatari steel prices to come down, said Ahmed.
Project costs up
Contracting firms are facing a big problem because of the steel price hike, said Essa Al Attiyah, Director of Qamraa contracting company.
Most of them made their estimates on the basis of steel costing Dh1,900 per tonne, since all through 2009 – and even in January 2010 – prices stayed below Dh2,000 a tonne. "But from March, the market situation started to change," said Al Attiyah.
There is nothing very surprising in this sudden climb, said Ahmed Al Mazrouie, Director of the Contractors' Association in Abu Dhabi.
He said the UAE building materials market is not stable, and so the sale of a tonne of steel for Dh3,000 or more in Abu Dhabi and Dubai is not a strange occurrence at all. "The prices of steel went from Dh6,000 [a tonne] to Dh3,000 and then to Dh1,600... and here they are rising… and might go down again – this is how the free market is," said Al Mazrouie.
"But the important thing," he stressed, "is that the rise is strong evidence of the intense activity in the country's contracting sector, whether in Dubai or Abu Dhabi."
Al Mazrouie said a more important point is of competition between scores of contracting companies to win projects worth billions of dirhams. These companies, he said, are quoting tender prices that are lower than the real cost.
"Those firms try to win any new projects in order to use the money in other projects that are running late. Undoubtedly, a few months later, we shall see that those companies are not able to complete the several projects they have bagged."
The official said he was surprised a few days ago to see that 40 companies were competing for one project in Abu Dhabi and "that the estimated cost given was at least 20 per cent lower than the market cost".