Middle East and North Africa construction steel demand is likely to be slow to recover, but future manufacturing expansion will require value-added steel products not produced in the region. So said participants at last week’s Saudi International Iron & Steel Conference (SIIS19) in Riyadh. Opinions differed, however, over how suitable the region is for investments into this new steelmaking capacity.

In the Middle East and North Africa, “…contrary to our expectations, the recovery of steel demand was delayed because construction projects have dried up,” Nae Hee Han Director, Economic Affairs and Chief Economist at World Steel Association, said at the event supported by Kallanish. While a recovery is forecast for North Africa in 2020, the Gulf Cooperation Council will remain sluggish due to low infrastructure project activity.

Turkey will continue to see a contraction in construction activity in 2020. “We are not very optimistic about (a Turkish recovery) because most of the problems facing Turkey are more structural than cyclical,” she observed.

Worldsteel economics committee chairman Saeed Al Remeithi said GCC steel demand has fallen over -20% in the last five years to 19 million tonnes/year because activity in construction, the main consumer, has contracted. The region needs to rebalance towards flat products, he explained.

National Committee for Steel Industry (NCSI) vice chairman Mohammed Al Jabr said Saudi Arabian mills are “…suffering,” operating at only 30-40% capacity because of the slower construction sector. “It is very challenging to look to the future,” he said. However, Vision 2030 projects give steel suppliers encouragement for the next decade, he added.

There is an immediate need for localised production of thin-gauge hot rolled coil and plate not currently produced in the GCC, Al Jabr observed. No progress has been made on the proposed plate mill in Saudi, and the NCSI would like to sit down with the investors to move the project along, he said.

World Steel Dynamics managing partner Peter Marcus, however, offered a more negative view for the Middle East steel market. The region has a “…devastating… unbelievably negative” list of problems, he said. These include the eventual return of Iranian steel exports once sanctions abate, the unpredictable price of oil, no regional import protection, and the lack of economies of scale to invest into new mega steel plants. Moreover, the region has no downstream steel market and gas is in short supply, meaning electricity costs have increased.

Al Jabr disagreed with the negative view on investment into new flat steelmaking capacity. The GCC has an ambitious plan to develop its downstream industry and will not want to import all of its requirement, he explained. The global benchmark capacity for a plate mill to ensure breakeven is 1 million tonnes/year, he said.

Marcus responded by saying that thanks to new technology steel is in a new age of lower capital investment per tonne of steel produced, making today a great opportunity for investment.

He also said the current HRC export pricing “…death spiral” is not yet at the bottom. The HRC price in late December 2019 could be “…just as catastrophic and terrible as it was at the end of 2015,” he observed. However, a recovery is expected in early 2020 due in part to reduced steel production and the beginning of re-stocking. HRC pricing “…death spirals” are here to stay and may happen twice per decade.