Steel producers in the UAE should welcome the recent changes in the pricing of iron ore and see them as an opportunity rather than a challenge an industry source tells MEED.
The source says that the recent price increases in the region are not only to do with the change of iron ore pricing from annual to quarterly and that any volatility the changes make should be utilised.
“If you know what you are doing volatility in any market can be advantageous,” the source says. “Steel is no different to currency or oil in that regard and although the end product is obviously very important it is at the initial procurement stage where you make your money.”
The source also says that the recent tightening of supply in the Gulf state that had added to the recent price rises has also been resolved.
“It is no secret that Emirates Steel (Industries) had a few technical problems with its rolling mill and a shortage of billets recently. That did have an effect [on the local market], but both of these issues have now been dealt with.”
The new quarterly pricing mechanism for iron ore has seen the price of the commodity rise by 90 per cent in some cases and has therefore pushed up the price of steel. The change was initiated by major iron ore producers like Australia’s BHP Billiton and Rio Tinto as well as Brazil’s Vale to allow the companies to take advantage of spot prices.