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Tuesday, 06 April 10
UAE STEEL TRADERS FEAR LOSSES ON GLOBAL HIKE
 A sudden spurt in the price of iron ore in the international market has caught local steel traders and manufacturers and a host of other steel-dependent industries, off guard. Emirates Business has learnt that the consequent increase in steel prices has singed many traders who were bearish about steel due to the slowdown in the construction sector and the overall economic downturn in the country.
In such a scenario, they are being forced to buy steel at higher prices prevailing abroad and sell it cheaply in the domestic market to honour existing contracts that were finalised a while ago when steel prices were low based on lower global iron ore prices.
Unlike in the past, when steel prices shot up mainly due to demand and supply factors, the reason for the current increase is the high iron ore price demanded by the major ore producers – Vale, the Rio Tinto Group and BHP Billiton – which together control about two-thirds of global trade.
Brazil's Vale, the largest iron ore supplier, last week broke a 40-year custom of selling ore on a yearly contract at a fixed rate and won a 90 per cent price increase from Japanese mills. Analysts are predicting a considerable increase in costs for steel-using industries and the automobile, construction and metals industries.
Rizwan Sajan, Chairman, Danube Building Materials, said 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 and the price per tonne of steel is Dh3,000 in the UAE, RO320 per tonne in Oman and BD300 per tonne in Bahrain.
"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."
Due to depressed market conditions, the domestic steel price in the UAE is even lower than the metal's price in other Middle Eastern markets like Syria, Iran, Libya and Egypt, he added. In the short-term, the high international steel price will adversely affect local contractors, who are trying to stage a comeback after the Dubai World debt settlement.
Sajan expects a price correction within a few months, but says it is impossible to predict by how much. He added that all players in the steel supply chain were working on minimum stocks and now there was a shortage in the market. "There is a general shortage in the market and overall availability is tight. 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.
"In the event of a price crash, as in 2008, traders will incur heavy losses. We, at Danube, never speculate and have a scientific replacement model. We try to run parallel and as close as possible to international pricing."
Sajan added that Danube has opened a new office in Saudi Arabia to cater to that market. "Saudi Arabia had a ban in place on the import of steel but leading Saudi steel producers, including Sabic, could not meet ocal demand. Now the ban has been revoked and other regional players are looking at the Saudi market," he said.
A number of steel traders and manufacturers told this newspaper they expect prices to increase further, but many players in the steel supply chain are cautious about the market trend.
A large company facing pressure is RAK Steel, a joint venture of Ras Al Khaimah Investment Authority and the Middle East Traders Group, which is the second largest steel rebar-manufacturing mill in the UAE with a capacity of 500,000 tonnes per year.
Ajay Aggarwal, Chief Executive Officer, RAK Steel, said: "Steel prices have started going up due to high raw material costs and not due to any additional demand for the product. While prices continue rising, traders or manufacturers – the entire supply chain in fact – cannot absorb this price increase. They will have to pass on the high prices to end-users."
Meanwhile, other smaller traders are equally worried, if not more. A steel trader told this newspaper: "Steel prices have gone up by Dh1,000 per metric tonne MT) in a short period – from Dh2,000 to Dh3,000 per MT. The Middle East steel demand seems irrelevant to international steel price movements and, in the region, only the Saudi Arabia market is doing well because there are many new projects [coming up] there."
Scrap prices have shot up by $200 – from $220 per tonne to $420. "Everybody in the steel supply chain is scared to take on more stock. Not just steel traders, even steel mills and contractors have incurred heavy losses in the recent past due to a sudden decline in steel price from record highs because of the economic slowdown.
"Traders are now reluctant to keep huge stocks and people are buying only for a month's requirement. Traders who have taken orders from contractors for delivery in the next three months have to respect these orders and deliver steel at agreed lower prices even though they are now procuring the metal at far higher prices. Those who do not have such orders are playing it safe because there is no actual demand for steel. We don't know how long the current price trend will continue," said the trader, requesting anonymity.
In the present situation however, local manufacturers are gaining an edge over international importers. "The lead time to import from Turkey, India or Brazil is three months, while we can deliver steel within a month. Therefore many traders prefer buying steel from local companies," said Suraj Malhotra, Marketing Manager at Al Ghurair Iron and Steel. The company is a leading cold rolled and galvanised steel manufacturer. It said the current price movement has affected it minimally.
However, Malhotra said various industries using steel will see a 20 per cent increase in prices within the next two months.
"We export 30 per cent of our products to Saudi Arabia. Local steel manufactures have an edge now because our lead-time is only one month. Importers from India, China or Turkey will take at least three to four months to deliver and we don't know what the price will be after four months. Traders and contractors buying steel from local manufacturers don't have to wait for four months in opening letters of credit, shipping and other delays," he said.
Ramesh Narang from Al Rama International, a leading steel trader, said: "Prices have started going up because of international reasons. Local demand for steel is not great and Saudi Arabia is the only regional market that looks encouraging. As steel traders had a bad year in 2009, they are treading cautiously. The volume of steel trade through the Dubai Gold and Commodities Exchange (DGCX) has been very low recently."
Narang said he was positive about long-term trends in the steel market but payment defaults and liquidity problems continued to haunt steel and commodity traders. He added that banks were still willing to finance genuine steel traders.
Aneesh Saifudeen, Business Development Manager, Rainbow Engineering Industry, a fabrication company in Sharjah, said: "The steel price increase is a major concern for fabrication units because there is cut-throat competition in the sector. Demand is poor in the market and profit margins are between two and five per cent.
"Compared with the boom periods in 2006 or 2007, there are many players in the market now competing for fewer projects. In order to attract the maximum business, we are keeping our margins to the minimum and most clients are demanding lower prices," he added.
Saifudeen said there was an acute shortage of some steel products, like UB beams and gif beams, because steel traders were not keeping enough stocks.
"Some of the beams used in tankers and vehicle parts fabrication are not available in the local market. There is considerable delay in getting these products from abroad. There are no local manufacturers making these specialised steel beams and we have to depend on imports."
Rainbow Engineering Industry manufactures or fabricates all kinds of heavy vehicle bodies such as high-pressure vessels, condensers and storage tanks.
Steep ore forces UAE steel plants to defer expansion
The high cost of iron ore in the international market could adversely affect expansion plans of steel manufacturing units in the country, delivering a double whammy after the deflation in steel prices caused earlier by the global economic downturn.
Expansion plans at two leading steel mills in the UAE are on hold due to the sharp decline in demand for steel on the back of the global economic slowdown.
RAK Steel, a joint venture of Ras Al Khaimah Investment Authority and the Middle East Traders Group, and the second largest steel mill in the UAE, had plans to increase production capacity of deformed steel reinforcement bars by 50 per cent to 750,000 tonnes by the end of 2009. The plant currently has a capacity of 500,000 tonnes of deformed steel reinforcement bars.
Ajay Aggarwal, Chief Executive Officer, RAK Steel, told Emirates Business: "The expansion plan is on hold as of now. We have the machinery in place but it is not been installed as yet."
Earlier, the company had announced plans for a 50 per cent expansion in steel production in view of mounting steel demand in the UAE's construction industry. It had announced a $165 million (Dh606m) investment in production for the domestic market, which is now largely served through imports from Turkey and other steel producing countries.
Al Ghurair Iron and Steel has also scaled back its original expansion plans for hot rolled (HR) steel due to the economic slowdown. Suraj Malhothra, the company's Marketing Manager, told this newspaper that the HR project was part of the original project feasibility studies. "We have a CR and galvanised steel plant. Instead of going in for an HR plant we are doubling our galvanised steel production from the current capacity of 20,000 tonnes per month. Awarding the contract for the plant will now be delayed until the fourth quarter of 2010."
Expansion is to be scaled down from the original plan, which according to some reports was worth $100m. The company's iron and steel complex, located on a one million sq ft plot in Abu Dhabi's Mussafah industrial area, was to produce 350,000 tonnes of HR, pickled and oiled steel products, of which 50,000 tonnes were of saleable cold-rolled full hard steel and 200,000 tonnes were of galvanised material.
Source: Emirates Business / Hellenic Shipping
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Sunday, 17 January 10
THE FUTURES FOR THREE YEARS (2010 - 2012) FIRMED UP - VISTAAR SINGAPORE
COALspot.com (Singapore): The freight market was a bit mixed with BDI up by about 159 points and closed at 3,299 points.
BDI
The cape index cont ...
Sunday, 17 January 10
NTPC TO DOUBLE CAPACITY BY 2017
NTPC, which will launch its follow-on public offer on February 3, plans to more than double its generating capacity to over 70,000 mega watts by 201 ...
Saturday, 16 January 10
HANDY CONTINUED FIRM CONDITIONS FOR MARKET IN THE ATLANTIC
HANDY
Continued firm conditions for the Handymax / Smax market in the Atlantic with the BSI having a continued upwards momentum. US$ 45,000 ac ...
Friday, 15 January 10
INDONESIA COAL - HEAVY RAINS HAVE LITTLE IMPACT ON COAL OUTPUT
Coal shipments from Indonesia's main coal-producing area are unlikely to be hit by heavy rains during January-February as many miners are prepared ...
Friday, 15 January 10
GOVT BRINGS IN DOMESTIC COAL MARKET OBLIGATION
The Energy and Mineral Resources Ministry has issued a ministerial decree requiring producers of coal and other minerals to allocate a proportion ...
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- Chamber of Mines of South Africa
- Intertek Mineral Services - Indonesia
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- SMG Consultants - Indonesia
- Siam City Cement - Thailand
- Romanian Commodities Exchange
- Barasentosa Lestari - Indonesia
- Interocean Group of Companies - India
- Central Electricity Authority - India
- Standard Chartered Bank - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Krishnapatnam Port Company Ltd. - India
- Vizag Seaport Private Limited - India
- Straits Asia Resources Limited - Singapore
- Minerals Council of Australia
- Jorong Barutama Greston.PT - Indonesia
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Power Finance Corporation Ltd., India
- Ministry of Mines - Canada
- Directorate Of Revenue Intelligence - India
- Therma Luzon, Inc, Philippines
- Xindia Steels Limited - India
- Meralco Power Generation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Asam (Persero) Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Planning Commission, India
- Singapore Mercantile Exchange
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- CIMB Investment Bank - Malaysia
- Kartika Selabumi Mining - Indonesia
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- PowerSource Philippines DevCo
- Meenaskhi Energy Private Limited - India
- Salva Resources Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Marubeni Corporation - India
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Timah Investasi Mineral - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Bangladesh Power Developement Board
- Gujarat Sidhee Cement - India
- Australian Coal Association
- Indonesian Coal Mining Association
- Oldendorff Carriers - Singapore
- Wood Mackenzie - Singapore
- Bayan Resources Tbk. - Indonesia
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Bhoruka Overseas - Indonesia
- Global Green Power PLC Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- SMC Global Power, Philippines
- Africa Commodities Group - South Africa
- Jindal Steel & Power Ltd - India
- Indogreen Group - Indonesia
- Eastern Energy - Thailand
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Savvy Resources Ltd - HongKong
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Mining Services - Indonesia
- Economic Council, Georgia
- Baramulti Group, Indonesia
- Ambuja Cements Ltd - India
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Karaikal Port Pvt Ltd - India
- White Energy Company Limited
- Wilmar Investment Holdings
- International Coal Ventures Pvt Ltd - India
- Coal and Oil Company - UAE
- Semirara Mining Corp, Philippines
- Australian Commodity Traders Exchange
- LBH Netherlands Bv - Netherlands
- Petron Corporation, Philippines
- Larsen & Toubro Limited - India
- Trasteel International SA, Italy
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Independent Power Producers Association of India
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Mjunction Services Limited - India
- Agrawal Coal Company - India
- Commonwealth Bank - Australia
- Edison Trading Spa - Italy
- Alfred C Toepfer International GmbH - Germany
- Electricity Authority, New Zealand
- GAC Shipping (India) Pvt Ltd
- Kaltim Prima Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Aboitiz Power Corporation - Philippines
- Latin American Coal - Colombia
- Carbofer General Trading SA - India
- Ind-Barath Power Infra Limited - India
- Cement Manufacturers Association - India
- Kobexindo Tractors - Indoneisa
- Madhucon Powers Ltd - India
- Videocon Industries ltd - India
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Sree Jayajothi Cements Limited - India
- Kumho Petrochemical, South Korea
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- Indika Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Tamil Nadu electricity Board
- Bharathi Cement Corporation - India
- ICICI Bank Limited - India
- Merrill Lynch Commodities Europe
- Parliament of New Zealand
- Banpu Public Company Limited - Thailand
- Maheswari Brothers Coal Limited - India
- Coastal Gujarat Power Limited - India
- Renaissance Capital - South Africa
- India Bulls Power Limited - India
- The Treasury - Australian Government
- Toyota Tsusho Corporation, Japan
- Price Waterhouse Coopers - Russia
- McConnell Dowell - Australia
- Ministry of Finance - Indonesia
- Cigading International Bulk Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Sical Logistics Limited - India
- OPG Power Generation Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Globalindo Alam Lestari - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- Chettinad Cement Corporation Ltd - India
- European Bulk Services B.V. - Netherlands
- Eastern Coal Council - USA
- Indian Oil Corporation Limited
- PNOC Exploration Corporation - Philippines
- Miang Besar Coal Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Manunggal Multi Energi - Indonesia
- San Jose City I Power Corp, Philippines
- Antam Resourcindo - Indonesia
- CNBM International Corporation - China
- Electricity Generating Authority of Thailand
- Central Java Power - Indonesia
- Thai Mozambique Logistica
- Energy Link Ltd, New Zealand
- Mintek Dendrill Indonesia
- IEA Clean Coal Centre - UK
- TeaM Sual Corporation - Philippines
- Sojitz Corporation - Japan
- Ministry of Transport, Egypt
- Sarangani Energy Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Star Paper Mills Limited - India
- Bhushan Steel Limited - India
- Parry Sugars Refinery, India
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- Sakthi Sugars Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Anglo American - United Kingdom
- London Commodity Brokers - England
- Jaiprakash Power Ventures ltd
- Malabar Cements Ltd - India
- Posco Energy - South Korea
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Holcim Trading Pte Ltd - Singapore
- The University of Queensland
- VISA Power Limited - India
- Bukit Baiduri Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Georgia Ports Authority, United States
- Coalindo Energy - Indonesia
- Makarim & Taira - Indonesia
- Metalloyd Limited - United Kingdom
- SN Aboitiz Power Inc, Philippines
- Medco Energi Mining Internasional
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Kepco SPC Power Corporation, Philippines
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