In spite of the fact that there are signs of optimism that a recovery will take place soon, the shock is still stronger and there is still some fear that the signs are just a mirage.
There is no doubt that the steel industry across the world, including the Arab steel industry, has faced a strong shock during the first half of this year. Perhaps one of the most significant countenances of this shock is the fast and sudden transition from the peak at which the steel industry was standing during the first half of 2008 into a very low level in the first half of 2009, represented in the fall of prices and decline of demand for steel at high rates.
Despite that the ascension of this industry up to the peak level has taken years, the steep fall was fast. Here lies the surprise which has brought about a state of uncertainty which this industry had not seen in any one of the past years.
As it is commonly said, the more brilliant standing at the top is, sometimes, the more difficult and frightening is the downfall. In both cases it is necessary to adapt to the new situation.
Reactions to facing this state experienced by the steel industry during the past months have been different. Though seeking the individual deliverance is the dominating behavior of individuals, even institutions in some cases, the behavior of the steel industry worldwide has been more consistent with looking for a method by which this industry can recover faster. The first step has been arranging for cutting the production down, which was clearly seen by the results of 2008 revealing a decline of 24% of the total production of 2007 mainly affected by the resutls of the fourth quarter of 2008 during which the signs of the economic crisis began to come to light more clearly.
The major companies were the most responsive to the method of cutting production down by reducing the rate of utilization of their production capacity and also by carrying out some partial closures of some of their mills as a normal reaction to the decline of demand and drop of exports.
Even though the Arab steel industry was not away from the impacts of this shock, it has, due to its own objective conditions, found itself more capable to encounter this crisis compared with other similar industries in a number of the countries across the world, proceeding from the existing growing demand in most domestic markets.
We may proudly register for the Arab steel industry the fact that it has not resorted to dispense with the labor force to cope with its financial crisis but it has sought to absorb the shock by maintaining the rates of its operation according to the requirements of the supply and demand in the markets.
Even though looking for profit is the principal demand of every company, the Arab companies have endeavored to maintain a profit margin within the limits allowing them to continually operate their mills, which will not result in stopping these mills and resorting to dismissing the workers as a solution to face the crisis or increase the profit margin.
The Arab steel mills responded greatly to the price changes. They reduced their prices down to the lowest levels in order to maintain their domestic markets and encounter the increasing import operations which caused great damages to the local producers as a result of the admission of imported products at very low prices resulting in the demand of producers in a number of the Arab markets to take protectionist measures against imports.
In spite of the hard circumstances which faced this industry at both regional and international levels, the ability to absorb the shock and continue execution of the expansion plans have constituted an important phenomenon in growing the capability of the Arab steel industry to keep steadfast and go on with the position of driving the growth seen in the markets of this region.
The steel industries in the Arab region may be added to the industries in China, India, some countries in Latin America and other countries where the steel industry could maintain positive growth rates corresponding to the objectives already set by this industry, even though it would be necessary to emphasize that the financial stimulus packages, especially to support infrastructure and the residential building, had a basic role for the steel industry to maintain its growth rates and its upward trend, which is clearly seen in the results of the activities of the steel companies in the Arab countries during the first half of 2009 and during 2008. In spite of the fact that the profits of these companies have declined , or rather, that these companies have lost a great portion of their profits achieved during the peak time, they could give good production figures, increase their sales to the domestic markets and keep prices stabilized in them. This certainly is the strength of this industry and is a positive sign of how much it is able to maintain its leading position not only in confronting the import attack witnessed in the Arab markets during the first half of this year, but also in supporting the investment plans in this industry and the allied industries as well and improving the image of the steel industry which had experienced a lot of attacks during the past years.