At the present stage, supporting major Arab JVs is gaining grave importance so that they can replace the construction of smaller iron and steel projects cropping up here and there. Such smaller projects are so vulnerable to any economic shakeout, whereas JVs shall boost the productivity of iron & steel industry within the Arab world along with benefiting of the existing raw materials.
As a result, Arab states must encourage the establishment of a new company to seek new inputs for the industry, particularly iron ore. In addition, such company may shield the Arab world from any future hikes in iron ore prices if the demand on iron & steel products became so intense, which is likely to happen in the coming years. The iron & steel industry normally sees recurrent ups and downs. Yet, the prices of raw materials of the steel industry, such as iron ore and scrap, have become the sole reference to finished products׳ prices.
Equally important is our lookout for the current types of partnership found between Arab steel companies and iron ore producers. In this regard, Mauritania is the only Arab producer and exporter of iron ore. In 2008, Mauritania exported approximately 11Mt of iron ore. This figure declined to 9.8Mt in 2009. However, the exports volume of Mauritanian iron ore is forecast to reach 12Mt in 2010.
Mauritania have invited Arab investors to invest in its iron ore mines, holding forums in order to show the benefits of investing in such rich mines. The forums made clear the importance of making use of such reserves in order to insure the flow of pellets into the Arab region, thus meeting the needs of steel companies for this strategic material.
The fluctuation in prices of finished steel products have also become in direct connection with prices of raw materials, on top of which is the iron ore.
Arab countries must not ignore the current reality of this industry and the accompanying price volatility of its inputs as a result of monopoly by raw materials giants. Arab countries have also to exert more efforts in order to invest in the metallurgical and mining activity within the Arab world, in addition to the necessity of providing investments required in this area.
The steel industry have undergone a real crisis as of Q4 of 2008 down through 2009. All steel companies suffered from the aftermath of the crisis last year in many ways as we all know. Likewise, many other industries have also suffered, and the steel industry in particular experienced the bad effects of steel dumping as the Arab steel industry was on the wrong side of it, a thing that took its toll on the Arab steel industry`s share in its own local markets. Many Arab markets are now writhing under the volume and price dumping which brought damage to the mills, sometimes forcing them to sell at a price lower than the cost.
In 2009, the Arab countries produced around 13.5Mt of steel despite the international crisis, that׳s why we dubbed it as an «Industry of Steel». It is an industry that is able to live through times of crisis. Nevertheless, there is still some challenges to be confronted, such as the overcapacity in longs production within the major exporting countries which target the region and offer lower prices. This fact causes local producers a lot of difficulty, especially as they are trying to rise with that industry to higher levels of efficiency in order to block the effects of dumping. Many countries around the world have also put in effect some procedures to prevent the dumping effect, including GCC states which levied 5% of protection duties on steel imports after the influx of large volumes at remarkably low prices, putting the local industry under a great threat.
The steel products demand in Arab countries is likely to reach 40Mt by 2014, i.e. doubling within the four coming years. Meanwhile, the planned future projects shall have a capacity of 30Mt within the same period. However, the share of foreign steel producers shall also rise within the Arab markets, and these producers already have overcapacity and a surplus in their own markets. So, demand on imports is forecast to double during the same period to reach 10Mtpy.
In view of the aforementioned facts, the Arab Iron & Steel Union sees that it is highly important to conduct studies on the future needs to cover the requirements of Arab markets. In addition, integration in steel industry is so essential, along with readily existent plans for investors to be able to participate in gigantic pan-Arab projects aiming to meet the needs of Arab markets during the coming years. Only major projects can stand in the face of the foreign foraying into Arab markets, add to that the ability of such projects to compete with and ward off any challenges or crises that might stand in the way of this industry in the future. Fragmentation of investment projects with smaller capacities is not good for this industry at all in the days to come.
The Arab steel industry is one that could maintain positive growth rates, a fact corroborated by the annual results of Arab steel companies in 2010, in spite of the decline in their profits. Arab steel producers were able to maintain good production figures, however relatively, to increase local sales and to stabilize prices. This is an evidence of how far this industry could go to sustain its pioneering position and to support investment plans in the steel industry as well as in all affiliated industries.