It is time for protectionist measures to be implemented to help the region’s steel producers, who are under pressure amid narrowing margins, softer demand and a flood of cheap products coming in from China, an industry gathering heard on Tuesday.
The GCC is already weighing action to help support its companies. The UAE, in discussions with other GCC governments, will look to increase import duties on products such as steel to 15 per cent from 5 per cent in order to protect local industries.
Hassan Shashaa, adviser to the chief executive of the UAE’s largest producer, Emirates Steel, speaking at the Arab Steel Summit in Dubai, said that amid a global capacity glut the world was moving quickly toward protectionism and that the Gulf should not allow itself to be left behind.
“Look at the US and Europe, they’ve done a lot to keep cheap products from entering their market, but at the end of the day if this region doesn’t start limiting [then] the GCC market will be the only market open for these products. It’s time. We need to consider such measures to protect local investors,” he said.
China has increased its steel exports by 663 per cent since 2009 and the country’s slowing economy has forced local demand for these products to wane since last year. With a growing surplus, Arab companies say that the region is becoming a dumping ground for the cheap steel.
The excess supply has sparked protectionist measures and last month the Group of 20 pledged to establish a global forum to address steel overcapacity.
“They are selling products at low prices to the point that local producers in Arab countries cannot compete,” said Khalid Al Bassam, chairman of Bahrain steel investor Foulath Holding, at the summit. “The lack of protection in most Arab countries is now a main concern for everyone.”
China was the world’s largest steel exporter in 2015, representing about a quarter of all steel exported globally. This year to June some 56.1 million tonnes of steel has hit international markets, according to the International Trade Association in the United States. China’s steel surplus has risen by 11 per cent in the year to June compared to the same period in 2015.
“The US applies up to a 500 per cent tax on Chinese products and they come here and just pay 5 per cent,” said George Matta, Ezz Steel’s corporate marketing officer in Egypt.
European hot-rolled coil, a regional benchmark, plunged to US$272 a tonne in February, down from $1,113 in July 2008, according to Metal Bulletin data compiled by Bloomberg. It rallied to $452 in May and has since retreated to $381, as of the end of last month.
However, China’s steel exports shrank in September for a third month to 8.8 million tonnes compared with a record 11.2 million tonnes a year ago, according to China’s customs reports earlier this month. Still, cargoes in the first nine months were up by 2.4 per cent on the year at 85.1 million tonnes, the highest ever for the period.
lgraves@thenational.ae
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