CAIRO/DUBAI: Egypt and Saudi Arabia will drive growth in steel consumption this year in the Middle East and North Africa region, where booming construction and infrastructure spending will lift demand. But demand in Dubai, once a major powerhouse with its insatiable steel appetite, is unlikely to rise in 2010, with banks still reluctant to lend for new construction projects in the indebted emirate and its warehouses filled with steel. In 2009, North Africa s steel demand looked almost immune to one of the worst downturns in the $500 billion global steel industry, which forced producers worldwide to nearly halve output as demand evaporated. Egypt s banks, flush with cash despite the credit crunch, and government stimulus spending on infrastructure, helped keep construction projects running, analysts say. Housing shortages in the region also kept demand buoyant. In North Africa, lending is available, people do not have a major problem accessing the cash, said George Matta, chief marketing officer at Egypt s biggest steelmaker, Ezz Steel. There are major infrastructure projects in Egypt due to housing demand and the government has been spending heavily in these areas, Matta said. Rising demand will allow steel producers to raise prices this year, analysts say, citing Saudi Arabia s SABIC, and Turkey s Erdemir, alongside Ezz. Matta sees apparent steel consumption growing by 8-10 percent in the Middle East and North Africa (MENA) region, after 2009 s 1 percent dip. The construction market in Egypt is very tight, the demand is high, said Ahmed Shams, vice president at equity research at EGG-Hermes. Egypt was among the top five exporters of cement, now we re importing due to high demand. Saudi Arabia and Iraq are the other high fliers in the region, driven by their booming infrastructure spending. The Saudi market remains the most vital in the region, driven by demand for commercial, residential and industrial development, said Abu Dhabi s Emirates Steel Industries (ESI) in an emailed statement to Reuters. The property market will benefit from Saudi Arabia s large and growing indigenous population, coupled with numerous government-funded industrial projects, it added. To match the rising demand, the world s biggest oil exporter will expand its domestic steel production capacity by at least 50 percent within the next three years. War-scarred Iraq is starting to lure foreign investors in an effort to rebuild the country. Iraq appears to be an area with significant new growth, there are a lot of mixed-use construction, hospitals, and refinery projects planned and underway there, creating demand for building materials, said Saud Masud, head of research for real estate at UBS in Dubai. Financing However, the picture in Dubai remains bleak, due to the world economic downturn and exacerbated by debt problems at conglomerate Dubai World, which delayed a possible improvement in lending conditions for several years. Construction project activity has dropped sharply, UBS s Masud said. Financing is still a big issue and I think will remain an issue for the coming few years. I don t believe public spending can offset the drop in private sector spending in Dubai ... and we might even see a pull back of government spending, he said. Several construction projects linked to Dubai World s subsidiary and developer Nakheel have been cancelled or put on hold, following the conglomerate s announcement of a standstill on debt. We used to export around 35 percent of our production to Dubai ... back in 2008, but now our exports going there are at around 20-25 percent because of lower demand, Bhaskar Dutta, the chief executive of Oman-based Jazeera Steel. He added material going to Dubai is mostly re-exported to Iran and Iraq, instead of being consumed domestically. Anecdotally there is a decent amount of steel stock sitting in Dubai and many contractors are looking to liquidate this inventory by selling it outside of Dubai, UBS s Masud said.
