In a report released on Monday — titled “Forging a New Path:
Opportunities for Latin American Metals and Mining Companies to Consider in the
Asia-Pacific Region” — Deloitte said the emerging economies in the Middle East
have been taking advantage of the income provided by oil to invest in the steel
industry.
These huge investments by the region in the metals and
mining sector, the report added, are not only as a means to supply the domestic
infrastructure and construction demands, but also as a way to diversify
national economies and make them less dependent on oil.
"As high oil prices continue to fuel economic growth
and capital investment, large investments are being made to increase domestic
steel production to meet growing demand, especially in the production of long
products such as reinforcing steel," it added.
"The Middle East may even emerge as a net exporter of
steel over the long-term as production capacity continues to rise and Gulf
Cooperation Council (GCC) countries become oversupplied. A number of Middle
Eastern countries are investing in multi-million dollar state-financed
projects, which are set to come on-stream over the next couple of years,"
the report said.
"With prices of iron ore and coking coal also rising
significantly, companies are actively searching for new sources of raw
materials and merger and acquisition (M&A) activity is showing signs of
recovery, with some Asian acquisitions taking place in the Middle East among
other regions," it added.
“Emerging economies, including the Middle East, are likely
to be the most motivated to engage in new deals and are more likely to consider
M&A activity as an avenue for growth,” said Mutasem Dajani, energy and
resources partner at Deloitte in the Middle East.
“The long-term outlook for the region remains positive as
infrastructure development, coupled with the potential for growth, offers
attractive opportunities for globally-oriented mining and metals companies,
suppliers and downstream partners," he added.
"Steel companies in India benefit from ore
self-sufficiency and high raw material prices. India is challenged by strong
government regulations, making international participation difficult," the
report said, while citing the potential of India and China.
"China’s most significant challenge to keeping pace
with demand is access to high-quality, easily extractable raw material. As a
result, Chinese companies have been active in searching for ore in Africa and
are partnering with companies in other countries to ensure their supply remains
constant," the report added.
