JEDDAH, 19 July 2007 — The steel industry in the Middle East is heading for major expansion as crude steel production is projected to increase by nearly 70 percent from 15.4 million tons in 2006 to over 26 million tons by 2010.

According to a report entitled “The Steel Industry Worldwide and Regionally: Assessment of Development and Outlook,” by the Kuwait-based Gulf Investment Corporation (GIC) released recently, steel demand in the region is dominated by long products, most of which are used in construction. Long product output such as rebar will be the dominant form of steel production, although its share of output will be declining. Rebar output grew from 14.1 million tons in 1997 to 21.6 million tons in 2004 and is expected to reach 28.9 million tons in 2010.

Although the Middle East has been one of the world’s active regions for steel plant suppliers in recent years, its steel plants are mostly starting from a lower steel-making base especially in flat products. The report said total flat products production has increased from 9.9 million tons in 1997 to 18 million tons in 2004 driven mainly by Turkey and Iran and to a lesser extent Saudi Arabia and Egypt.

In the Middle East, most current investments are driven by growth in domestic demand emanating from strong construction boom. Steel demand in the region is expected to increase from 70 million tons in 2007 to around 90 million tons in 2010. GCC steel demand will be in the range of 20-30 million tons during the same period.

According to a report in the Metal Bulletin Research (MBR) in its December 2006 issue, steel capacity expansion will be dominated by Egypt, Saudi Arabia and UAE. Egypt will have added capacity expansion of nearly two million tons, Saudi Arabia 5 million tons and UAE 1.5 million tons by 2010.

Also finished steel products capacity will increase by 46.7 percent from 22.9 million tons in 2006 to 33.6 million tons in 2010. Main capacity increases include UAE by 3.1 million tons, Egypt by 2.5 million tons and Saudi Arabia by 1.9 million tons. According to MBR report, raw steel production is expected to reach 51.5 million tons and 62.9 million tons in 2007 and 2010 respectively.

Due to rising steel demand, which is growing at 9 percent rate, Middle East to become a net importer of semi-finished steel, mainly billet, slab and HR coils. The large increase in consumption of semis and flat products has been partly met by imports, which have been risen from 6.4 million tons in 1997 to around 25 million tons in 2005 and is expected to reach 30 million tons this year.

According to the GIC report, GCC countries are net importers of products such as ingots, steel tubes, seamless, hot rolled rod in coil, welded tubes and cast iron pipes. However, net imports are likely to fall back to 5.4 million tons by 2010 with the expected increase in domestic demand.

Arab countries have DRI/EAF plants with total capacity of 8.75 million tons. Qatar and Saudi Arabia have started their production in 1978 and 1983, respectively, with production capacity at 0.72 million tons and 3.65 million tons each, then Egypt with 2.92 million tons in 1986 and Libya with 1.46 million tons in 1990. Middle East iron ore imports have increased from 14.5 million tons in 1997 to 22.2 million tons in 2004 and are expected to reach 42.5 million tons by 2010.

Currently, GCC countries are negotiating to sign possible Free Trade Agreements (FTAs) with China and India. Such agreements are likely to have a great impact by inducing more imports of finished steel products to the GCC market, mainly from China.

The GIC report added that the Middle East steel consumption has grown by 31.1 percent from 34.7 million tons in 2005 to 45.5 million tons in 2006 and is expected to reach 73.3 million tons by 2010. GCC countries are considered among the largest consumers of iron and steel products with per capita consumption estimated at 378 kg while world per capita consumption is barely 182 kg.

Total per capita consumption of finished steel in the Middle East in 2004 was 146 kg. For Arab countries, the UAE has the highest per capita consumption with 801 kg while Sudan the lowest with just 12 kg. This reflects the wide divergence among economies within the region. It is expected that by 2010, the population of the Middle East will grow to an estimated 412 million, and per capita consumption will rise to 182 kg. Per capita consumption of crude steel (378 kg) for GCC countries, on average, is relatively high compared to other regions such as Asia (138 kg), CIS (123 kg) and the global average but lower than Europe (399 kg).