JEDDAH: The GCC countries, which produce about 10 million tons per year but consume almost 25 million over the same period, producers need to coordinate better to achieve targets. The region's steelmakers plan to close the gap. At last week's MEED Middle East Steel 2010 conference, Gulf United Steel Company, the Bahrain-based metal industry holding company, outlined its vision for an integrated cross border iron and steel behemoth. GCC steel demand is not expected to grow in 2011 but consumption is forecast to grow steadily as Gulf project investment accelerates. Steel prices could average $700 per ton next year. The region's big steel makers have massive long-term plans and if the big three GCC steelmakers press ahead with their investments, the region could have a steel surplus in 10 years. Saudi Arabia's Hadeed, the largest producer in the GCC has declared its long-term vision is to expand capacity by 200 percent to 15 million tons. Emirates Steel Industries has announced it is aiming to lift annual DRI capacity to 6 million tons from 2 million at present. Qatar Steel, which is now operating at almost 100 percent of its 2 million ton per year capacity also has expansion ambitions. However, GCC expansion plans depend upon securing bank finance. But the banks stung by the shock of 2008 and facing new capital rules under Basle III are charging more for smaller loans with shorter tenors. Steel projects will need more equity finance from now on. Then there is the downstream industry, where there are some serious challenges. The UAE has the biggest problems with rebar production capacity that is now estimated to be more than twice demand. The expansion of the capacity of its subsidiary Gulf Industrial Investment Company's iron ore palletizing plant to 11 million tons per year was completed at the start of 2010. Foulath owns 51 percent of the United Steel Company which is building 1.8 million ton per year direct reduced iron plant, a melt shop and rolling mill next to GIIC. The SULB project is due to be completed in early 2013. Foulath's upstream plans call for investment in iron ore mines in Brazil and ore palletizing plants in Egypt and Oman. It also will soon complete the purchase of a rolling mill in Saudi Arabia. After hitting a record high of more than $1,000 per ton in the summer of 2008, steel prices tumbled with unprecedented rapidity to little more than one third of this figure in less than nine months. Demand crashed by 20 percent in 2009. Steel has rebounded and global production this year will probably recover to about 1,300 million tons.
