Emirates Steel Industries temporarily suspends steel production

14 October 2008
Emirates Steel Industries (ESI), the Abu Dhabi state-owned steel rebar and coil producer, has temporarily suspended production due to the size of steel stocks in the UAE, ESI deputy chief executive officer Sridhar Krishnamoorthy told MEED’s Middle East Steel 2008 conference in Dubai on 13 October.

He also said that he believed steel prices, which have fallen by almost 50 per cent since reaching a peak in July, will soon start to bottom out and may even rebound in the first quarter of 2009.

“We expect to resume production in the third week of October,” said Krishnamoorthy.

He said that there are steel stocks of about 2 million tonnes in the UAE. This compares with projected annual consumption in the federation of 6 million tonnes.

Krishnamoorthy said that action to reduce production will soon have an impact on steel prices.

“The local market is going through an inventory correction and this is happening across the world,” he said.

“By the end of 2008, we believe the stocks will have come back to reasonable levels. Our belief is that prices will stabilise in the fourth quarter and even bounce back in the first quarter of 2009.”

Krishnamoorthy said he expected rebar prices, which have been in the $700-800 a tonne range in October, will rebound by about $50 a tonne in the first half of 2009.

Krishnamoorthy said that ESI, the only significant rebar and wire rod maker in the UAE with annual capacity of 1.84 million tonnes, plans to open the first phase of its integration project.

“We are in the process of changing to an integrated steel producer,” he said. “We shall have liquid steel from January 2009.

“We have started our second phase which will double our steel production capacity and we expect ESI to produce about 3 million tonnes of steel compared with capacity of 1.84 million now.

“We also plan to go into flat products and seamless pipes and we are working to promote the downstream industry.

“We shall be working with Adbic [Abu Dhabi Basic Industry Corporation] in promoting the metals city for downstream industries.”

Krishnamoorthy said the long-term outlook for the GCC market is encouraging.

He said that demand in the region reached 17 million tonnes in 2007 and could grow to 60 million tonnes, compared with production of 35 million tonnes, in 2020.

Krishnamoorthy said that GCC steel producers need to co-ordinate plans and raise efficiency. “Steel producers have to be cost-competitive,” he said.

Options for the region’s industry include overseas acquisitions, consolidation and other measures to secure economies of scale.

ESI is wholly owned by the government of Abu Dhabi and is based in the Industrial City of Abu Dhabi.

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