Steel sales fall as buyers wait further price drop

Steel companies in the UAE have experienced a fall in demand as buyers hold out for a further decline in prices.

A Worker lifts a steel bar at a construction site in Dubai Marina.

The country's steel companies have experienced weaker demand in recent weeks as buyers wait to see if there will be a further decline in prices, according to a major supplier. The price of a tonne of steel has dropped to about Dh3,600 (US$980) after climbing from Dh3,000 to about Dh6,000 per tonne during the first six months of this year, according to Sameh Hassan, the chief executive of Madar Holding, a steel supplier. Mr Hassan said the price of billet and scrap metal had also dropped substantially, leading contractors to postpone bulk purchases as they wait to see if prices will drop further. "The decrease in global steel prices is the main reason, and demand also seems to have suffered in other parts of the world," Mr Hassan said. "But for this region, while it is normal to see a slowdown in demand during summer and Ramadan, it has been declining even further because of the price situation. In the last few weeks buyers have been holding back purchases to see if prices will go down more, but I personally believe they will now stabilise." The price decline has come as a relief to contractors, whose profits in the past year have taken a hammering from the soaring cost of steel and cement, as well as the cost of transporting materials and additional labour costs. However, Ahmad Etman, the managing partner of Al Sahel Contracting Company, said the price drop in steel had not stopped contractors from buying. "We have timetables and still need to concentrate on meeting them, so I wouldn't agree that contractors would necessarily wait for the price to come down further. We can't just stop buying steel," he said. "Many suppliers imported a lot of steel at the beginning of the year when the price was high, so now there is an oversupply. There is also less demand for steel all over the world. But although steel might cost less now, cement is still high." The Ministry of Economy capped the price of cement last year at Dh295 a tonne in a bid to better control prices. The cap was increased by about 15 per cent to Dh340 per tonne in May this year. In July, Abu Dhabi's Department of Planning (DEP) announced plans for an index to track building material prices and limit price manipulation. The price index would include 22 items, 90 per cent of them basic construction materials. At the time, the DEP said the index would help in the early assessment of project costs, a step that could limit disputes between project owners and contractors. It would also indicate periods of surge and stability in construction prices, which would help contractors and project owners to identify the rising rates and reasons for price fluctuations. By improving transparency in the materials market, the index should also help to identify building material suppliers who manipulate prices. [e-mail]