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The United Arab Emirates (UAE) steel producer Arabian Gulf Steel Industries (AGSI) planned to double its consumption of scrap by early 2025 amid a new increase to the country’s steel production capacity, Deepak Bhandari, the firm’s chief commercial officer, said at Fastmarkets’ Middle East Iron and Steel (MEIS) conference in late November.
“We at AGSI at present buy 45,000-50,000 tonnes per month [of scrap]. We have an expansion program under way which we hope to complete by the second quarter of next year, after which we will be buying around 60,000 tpm,” Bhandari said at the event on November 21.
“In addition, there is also a plan which is at the design stage right now, to put up a new meltshop. Once that is completed, we [would] expect to consume around 100,000 tpm of scrap,” he said. “Although it is in the design stage, the plan is to get it up and running by the last quarter of next year, or maybe early 2025.”
The mill currently has installed capacity for 400,000 tonnes per year of semi-finished steel, according to the Arab Iron & Steel Union (AISU). It is a producer of steel billet, which can be sold on the merchant market to re-rollers.
AGSI is considered to be the single largest scrap buyer in the UAE, outstripping the purchases of major steel producer Emirates Steel Arkan, which is mainly a consumer of direct-reduced iron (DRI).
AGSI’s new plans come in addition to plans by Emirates Steel Arkan to consume more steel scrap over the coming years, Fastmarkets understands.
As of 2022, the UAE had 7.72 million tpy of installed capacity for the production of long steel, and 4.23 million tpy of semi-finished steel capacity, according to the AISU. As well as producing its own steel billet, the UAE also imports semi-finished steel from other nations in the Middle East-North Africa (MENA) region.
But this has been a challenging year for mills in the UAE, with crude steel output in January-September 2023 falling to 2.24 million tonnes, down by 6.8% year on year, according to the World Steel Association. The UAE’s output of DRI fell by 4.3% to 2.11 million tonnes over the same period.
The outlook for the country’s construction sector remained positive, with analyst Oxford Economics forecasting increases to value-added construction output of 2.3% year on year for 2024 and 3.2% for 2025, although those figures would represent a slowdown from the 4.8% year-on-year growth seen in 2022.
A UAE steelmaker source told Fastmarkets that he also expected more firms to set up steel mills in the the country over the coming years. This was because he thought that steelmakers in the UAE would be well-placed to benefit from demand for steel in the region’s mega-projects, such as Neom in Saudi Arabia. He believed that Saudi Arabian producers would not have enough capacity to meet all of the latent demand once such projects get into high gear.
The current consumption of steel scrap in the UAE local market is around 120,000 tpm, which will rise to around 150,000 tpm by the second quarter of next year, following investments in steelmaking capacity and scrap buying in the UAE, according to Bhandari.
“I’m of the opinion that scrap use in this country should be 200,000 tpm, which is not there,” Rajesh Agarwal, chief execujtive officer of recycler RKG International, said. “From the supply side, I see 100,000-120,000 tpm [of consumption].”
Other market participants, including other steelmakers in the Gulf region, believed that the UAE’s current consumption of ferrous scrap was around 700,000 tpy.
Scrap generation in the UAE’s local market currently exceeds 2 million tpy, according to market sources. There was a theoretical export ban on such materials in place until December 2023, although some material still leaves the country, usually by methods such as transshipment or misdeclaration of HS codes at customs.
Fastmarkets’ latest weekly calculation of its steel scrap HMS 1&2 (80:20 mix) index, domestic, delivered UAE, was 1,329.55 dirhams ($362) per tonne on November 28. This was up by 65.17 dirhams per tonne week on week, and has now risen for five consecutive weeks.
With the increased capacity planned in the UAE, Agarwal predicted a shortage of material in the coming years, which could compel mills to dip into the import market.
“The availability of scrap in the UAE market is limited,” Agarwal said. “The question is how much the local producers will produce and consume. In the case that Emirates Steel starts to use more scrap and less DRI, there would definitely be a shortage of scrap in the UAE, and imports would be the only option.
“In Saudi Arabia,” he added,” they have local availability, exports of scrap are totally banned, and the option is that they import. I think, with the new capacity here, the UAE will be a net importer of scrap very soon. [The mills] will have to import – they have no option.”