The results of the first half of 2010 gave a new outlook on the level of most Arab steel companies, an outlook that can now be described as bright. These results have changed the current view that engulfed most of 2009.
A quick look at the news published in this issue along with reading the press releases issued by companies in relation to the results for the past months of the year, in particular for the second quarter of it, may be enough for this impression to sink in. The notion these results of the recent period give constitutes a significant development on the road to regain confidence in the abilities and potential of steel industry to overcome hardships, despite the fact that these results have not yet reached the positive pre-crisis levels. There might also be more than one indicator corroborating our views regarding the image of the steel industry in H1 of this year, which can be used as basis to more positive forecasts for H2 and beyond.
The indicator based on the increase in production and sales is but one of many that suggest an improvement in the situation of this industry. The production figures of steel companies during H1 of this year show a very clear increase, especially in the output of major companies which have the influence to change the market trends.
This change in the production levels is a very important indicator of the market condition, as most of the companies plan their production according to their own expectations of the market dynamics. In this regard, sales have shown a positive development influenced by the strong demand and price increases. In spite of that, the price increases went to cover the rising input costs rather than to the companies pockets.
Demand on the market have been good during H1 of the year, in addition to the fact that prices trend was going in the direction to enhance the profitability of the industry regardless of all the fluctuation and the rise in input costs.
In the same direction that boosts the regained confidence impression, there was the strong launch of many new projects along with the continued expansion in many Arab iron and steel companies. There is also the strong comeback of the banks to loaning and to finance investments in many new projects. A glance at the funding processes of many of the steel companies during the current year is more than enough to corroborate the fact that this industry have regained some of its resources that shall enable it to become once again the leader of growth in many Arab countries, contributing very vigorously in the development process.
Weak financing and the lack of liquidity were of the hindrances in the way to implement some projects during 2009 and in some previous years. Nevertheless, the volume of loans extended to new projects in 2010 have been announced at several billion dollars during H1. Emirates Steel Industries alone got a loan of US$1.1 billion; an indicator to the availability of financing potential that are no more a problem facing the new projects.
On the other hand, although in a different direction, the Arab steel industry, which have suffered a lot during 2009 because of an imports influx exceeding the local market needs, continued to face the same problem of imports in excess during H1 of this year. In this regard, the steel imports coming from only one country to several Arab countries exceeded one billion dollars worth for the period in question.
This situation, which came to a head in the Egyptian market, have lead to filing dumping lawsuits against Turkish rebar imports, demanding protectionist measures to be put in place and duties on imports to be levied. These demands have been and still are the last resort in many countries, as 27 states from various parts of the world applied protectionism to steel according to a EUAROMETAL report. Among these states, there are several members of the G-20, in addition to China, Russia and some East-Asian states. Protective measures aim to shield steel industry from falling back to crisis times as a result of unfair steel trade practices, especially for countries which have opened their markets wide before imports, such as some Arab countries.
The Arab Iron & Steel Union (AISU), representing more than 90% of the steel producers within Arab countries, is keen to protect the steel producers and steel industry from any threats, just as it feels the need to protect the consumer who is the main objective of steel producers, on top of which is the imports influx of a dumping nature entering freely to the local Arab markets. Conversely, Arab steel products don׳t have the same freedom to enter other markets as there are many restrictions imposed by many countries on imports.
Protectionism from the viewpoint of AISU is not only measures taken against imports, it׳s rather the necessity to maintain fair competition and to sustain the right of steel producers to protect their investments in the future.