Record high oil prices will help boost steel demand in the Middle East, where cash-rich governments are expected to allocate more on infrastructure spending, a conference heard this week.
Global steel demand, particularly in the form of long steel, is expected to be strong this year, despite talk of a slowdown in the United States as the Middle East and China take up the slack.
Demand for iron and steel products in the world's biggest oil exporting region, where more than $1 trillion of infrastructure projects are in the pipeline, could climb more than 30 per cent to 19.7 million tonnes by 2008, according to the Gulf Organization for Industrial Consulting.
"The higher the oil prices, the more governments can spend on construction," said Ali Bin Hassan Al Muraikhi, commercial division manager of Qatar Steel.
"In Gulf countries, there's a lot of need for new buildings, developments and where there's a surplus of cash it encourages to spend more," he said.
The price of rebar, a form of long steel mainly used in construction, has risen significantly and faster than that of flat steel products since the start of the year.
Global rebar consumption has reached to 218 million tonnes last year, and is expected to rise to around 234 million tonnes, a steel conference hosted by SteelOrbis heard this week.
As of last year, around 65-70 per cent of the consumption is in coming from the Middle East and Asia while the highest consumption per capita is in the United Arab Emirates.
"Dubai has become a brand," said an official from a Dubai-based building materials manufacturer. "The population is expected to double in the coming four years, which means there will be need for more houses, more infrastructure."
In Saudi Arabia and Abu Dhabi, infrastructure projects are mainly funded by governments, said the official, while in Dubai there are many private investments too.
Saudi Arabia is the world's largest producer of oil, which shot up to a record high of $111.80 per barrel last month.
However, sky-high oil price helping Middle East governments to prosper has its negative side-effects, such as inflation.
"For sure Middle Eastern governments will be able to start new projects ... But when oil goes up inflation also goes up," said Sudarshan Singh, group technical director at Saudi Arabia's Al Tuwairqi Group. "That could put a brake on development projects." (Reuters)
Middle East likely to buy more steel