News
5% customs duty increases demand for local steel
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Demand for locally produced steel has increased since the government reintroduced the five per cent customs duty on steel and cement, senior industry officials have said.
While local producers said their sales had increased during the past two months compared to the same period last year, traders said several factors including the volatility of prices are making them opt for locally produced steel.
While Turkey is selling rebars at between $420 (Dh1,542) and $440, local steel is being sold at about Dh1,900. According to steelprices-middleeast.com, an online portal that monitors rebar prices in the region, prices have remained unchanged during the past week. Within the GCC, Qatar has the highest prices in the local market, almost $94 more than the current price in the UAE, while rebar in Bahrain is priced $14 less than the UAE prices, it said.
Ajay Aggarwal, CEO of RAK Steel yesterday told Emirates Business the demand for local steel has definitely increased compared to the same period last year.
"Our products have sold more during the past two months, compared to the same period last year. The reintroduction of five per cent customs duty by the UAE Government last month has also played a role," said Aggarwal.
Last March, the UAE Government had removed the five per cent customs duty on the import of steel and cement following a drastic increase in prices and a shortage of stocks. Earlier this year, local producers had demanded the reintroduction of customs duty stating that cheap exports to the UAE, coupled with a global slowdown was creating a glut in the local market.
Aggarwal had then warned that demand for steel would drop by almost 50 per cent in the UAE and by 35 per cent across the GCC during 2009. In March, the government had finally decided to reintroduce the customs duty. Aggarwal also said other factors such as volatility in terms of prices and lack of custom duty made steel products contribute to the increasing demand for local steel.
The advantage with locally produced steel, he said, is the flexibility. "Local mills can produce steel according to the specifications requested by the customers. Even the money is tied up for a lesser period of time. In times of severe liquidity crunch, buyers prefer these aspects," said Aggarwal.
"Local producers stand to gain as the waiting period for imported steel varies between six and 10 weeks. "In times of such volatility, prices can go either way. Whereas when steel is purchased locally, the waiting time between order and delivery is just about two to four weeks. The risk is greatly minimised – by almost four to eight weeks. Almost 75 per cent of what we produce is for local consumption, which had dropped due to lack of demand. However, our sales have continued to remain good and have increased," he said.
Emirates Steel and RAK Steel are the two largest manufacturers of steel in the UAE. RAK Steel, owned by the Ras Al Khaimah Investment Authority, commenced commercial production of a range of rebars for the construction industry during the end-February. Last week the company announced that it plans to invest $165 million to increase its capacity by 50 per cent to 7,50,000 tonnes by the year-end.
Meanwhile steel prices, which have been highly volatile during the past few months are moving towards some stability. "Recently, the swing has reduced slightly. And there are signs of a more stable price structure in the past few weeks. The worst nightmare for buyers is volatility and the risk is reduced when they buy from local markets," said Aggarwal.
Several traders when contacted said the volatility in steel prices in the second quarter of 2009 could be coming to an end. "We are witnessing a sort of constant price structure during the past couple of weeks. In May, rebar generally remained level with that of April's average price of about $480 per ton FOB," said one trader.
Meanwhile, reports indicate Turkish companies actually put a halt on falling prices to maintain it at about $420 per tonne to $440 per tonne FOB. "Although real agreements obviously can be concluded as more advantageous for consumers," said a Rusmet analysis.
The demand for construction products in Europe and the Middle East remains weak," it said. European steel industry is low and is likely to remain low until autumn. In late May, activity fell even in Eastern Europe that saw some rally in April.
"Egyptian companies have not resumed import operations. Besides, Algeria cut rebar purchases due to domestic market overloading. The UAE now makes the largest sales, but local traders have been waiting for the prices to fall further," it said.
Prices will remain stable due to the rather high cost of raw materials and the semis and the possibility of supplies to alternative markets.
Reports also indicate that most Turkish mills have temporarily stopped purchasing scrap, due to weak demand for Turkish rebars. Although the scrap price has fallen on reduced demand, the current price is still not attracting the mills to resume their purchasing. The latest transaction price was about $240 per tonne and current offers are around the same level.
Meanwhile, Turkey has also been trying to increase the prices on structural steel. The UK-based steel consulting major MEPS said higher prices are driven by the spike in the cost of semi-finished products – and not on actual demand. "However, very little structural steel was sold and by mid-May sections and beams prices started to backtrack towards April levels. Market conditions within the flat products segment stabilised this month. Enquiries have increased but were speculative in nature. Procurement managers are still not responding to the low prices. Selling figures for cold rolled products may rise next month owing to a shortage of material."
MEPS said: "UAE traders have been more positive this month." Nevertheless, it is too soon to pass a judgment if buyers will restart importing material or not, it said. "Underlying demand continues to be restrained. Although quayside stocks have fallen to manageable levels, they still have not been exhausted due to the challenging trading conditions. The import duty has increased the popularity of locally produced long products."
While local producers said their sales had increased during the past two months compared to the same period last year, traders said several factors including the volatility of prices are making them opt for locally produced steel.
While Turkey is selling rebars at between $420 (Dh1,542) and $440, local steel is being sold at about Dh1,900. According to steelprices-middleeast.com, an online portal that monitors rebar prices in the region, prices have remained unchanged during the past week. Within the GCC, Qatar has the highest prices in the local market, almost $94 more than the current price in the UAE, while rebar in Bahrain is priced $14 less than the UAE prices, it said.
Ajay Aggarwal, CEO of RAK Steel yesterday told Emirates Business the demand for local steel has definitely increased compared to the same period last year.
"Our products have sold more during the past two months, compared to the same period last year. The reintroduction of five per cent customs duty by the UAE Government last month has also played a role," said Aggarwal.
Last March, the UAE Government had removed the five per cent customs duty on the import of steel and cement following a drastic increase in prices and a shortage of stocks. Earlier this year, local producers had demanded the reintroduction of customs duty stating that cheap exports to the UAE, coupled with a global slowdown was creating a glut in the local market.
Aggarwal had then warned that demand for steel would drop by almost 50 per cent in the UAE and by 35 per cent across the GCC during 2009. In March, the government had finally decided to reintroduce the customs duty. Aggarwal also said other factors such as volatility in terms of prices and lack of custom duty made steel products contribute to the increasing demand for local steel.
The advantage with locally produced steel, he said, is the flexibility. "Local mills can produce steel according to the specifications requested by the customers. Even the money is tied up for a lesser period of time. In times of severe liquidity crunch, buyers prefer these aspects," said Aggarwal.
"Local producers stand to gain as the waiting period for imported steel varies between six and 10 weeks. "In times of such volatility, prices can go either way. Whereas when steel is purchased locally, the waiting time between order and delivery is just about two to four weeks. The risk is greatly minimised – by almost four to eight weeks. Almost 75 per cent of what we produce is for local consumption, which had dropped due to lack of demand. However, our sales have continued to remain good and have increased," he said.
Emirates Steel and RAK Steel are the two largest manufacturers of steel in the UAE. RAK Steel, owned by the Ras Al Khaimah Investment Authority, commenced commercial production of a range of rebars for the construction industry during the end-February. Last week the company announced that it plans to invest $165 million to increase its capacity by 50 per cent to 7,50,000 tonnes by the year-end.
Meanwhile steel prices, which have been highly volatile during the past few months are moving towards some stability. "Recently, the swing has reduced slightly. And there are signs of a more stable price structure in the past few weeks. The worst nightmare for buyers is volatility and the risk is reduced when they buy from local markets," said Aggarwal.
Several traders when contacted said the volatility in steel prices in the second quarter of 2009 could be coming to an end. "We are witnessing a sort of constant price structure during the past couple of weeks. In May, rebar generally remained level with that of April's average price of about $480 per ton FOB," said one trader.
Meanwhile, reports indicate Turkish companies actually put a halt on falling prices to maintain it at about $420 per tonne to $440 per tonne FOB. "Although real agreements obviously can be concluded as more advantageous for consumers," said a Rusmet analysis.
The demand for construction products in Europe and the Middle East remains weak," it said. European steel industry is low and is likely to remain low until autumn. In late May, activity fell even in Eastern Europe that saw some rally in April.
"Egyptian companies have not resumed import operations. Besides, Algeria cut rebar purchases due to domestic market overloading. The UAE now makes the largest sales, but local traders have been waiting for the prices to fall further," it said.
Prices will remain stable due to the rather high cost of raw materials and the semis and the possibility of supplies to alternative markets.
Reports also indicate that most Turkish mills have temporarily stopped purchasing scrap, due to weak demand for Turkish rebars. Although the scrap price has fallen on reduced demand, the current price is still not attracting the mills to resume their purchasing. The latest transaction price was about $240 per tonne and current offers are around the same level.
Meanwhile, Turkey has also been trying to increase the prices on structural steel. The UK-based steel consulting major MEPS said higher prices are driven by the spike in the cost of semi-finished products – and not on actual demand. "However, very little structural steel was sold and by mid-May sections and beams prices started to backtrack towards April levels. Market conditions within the flat products segment stabilised this month. Enquiries have increased but were speculative in nature. Procurement managers are still not responding to the low prices. Selling figures for cold rolled products may rise next month owing to a shortage of material."
MEPS said: "UAE traders have been more positive this month." Nevertheless, it is too soon to pass a judgment if buyers will restart importing material or not, it said. "Underlying demand continues to be restrained. Although quayside stocks have fallen to manageable levels, they still have not been exhausted due to the challenging trading conditions. The import duty has increased the popularity of locally produced long products."
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