The Middle East steel industry is in turmoil as global overcapacity and a flood of cheap imports to the region has driven down prices and hit profitability, according to the head of the UAE’s largest steel producer.

Saeed al-Romaithi said that “unreasonable” export-driven policies, especially from China, have driven steel prices down to 2004 levels.

“The gap between steel production and consumption in China has widened… the Chinese are not going to slow down their export drive any time soon,” said Al-Romaithi speaking at the Middle East Iron & Steel conference in Dubai on 15 December.

Chinese steel exports to Arab countries increased by 80 per cent in 2014 and are expected to rise by another 40 per cent in 2015, according to Al-Romaithi, who said prices had fallen 50 per cent since 2013.

The Arab world has the capacity to produce 53 million tonnes a year (t/y) of steel and 58.7 million t/y of finished integrated products, but capacity utilisation is languishing at under 40 per cent.

Al-Romaithi said that capacity in the Arab region grew 12 per cent over the past two years and is expected to increase another 8 per cent by 2018.

The construction sector dominates steel demand in the region, accounting for 90 per cent of consumption. In 2015 the Arab world produced 28 million tonnes of steel but imported 27 million tonnes.

The Arab world is a significant exporter despite, according to Al-Romaithi, the region’s finished steel making capacities able to meet regional demand.

Direct-reduction-iron-based (DRI) steel industries in the Middle East have not felt the benefit of lower energy and raw materials prices to the same extent as other regions. Al-Romaithi said that energy prices have increased due to subsidy cuts, while DRI-grade pellets prices were maintain by large suppliers despite the drop in global iron prices.

Al-Romaithi called for the region’s steel producers to reduce their dependency on strong DRI-grade suppliers, maximise labour productivity and pursue energy saving measures and value-added products.

At the same time, the CEO called for governments to safeguard the sector with antidumping duties and import quotas, while improving certification and quality control.

Al-Romaithi said that if the market and policies do not change, some companies in the region will go out of business.

“It is too difficult for producers… something must be done. We are requesting balance, an even playing field,” the CEO said.