At the 50th annual meeting of worldsteel (World Steel Association) held in Dubai on October 10-11, Dr. Nae Hee Han, director of economic studies and statistics at worldsteel, and Dr. Baris Ciftci, head of raw materials at worldsteel, jointly made the presentation summarized as follows on the Middle East and North Africa (MENA) region and its steel demand prospects:
The MENA region, which includes 17 countries - all North African countries and almost all Middle Eastern countries (except Israel and the Palestinian territories) - has come under the spotlight due to its strong growth in the past decade. Despite shared links and characteristics, there are significant differences in development between the countries. The region accounts for 4.8 percent of global steel demand and 2.2 percent of global steel production. It has significant potential with a very young and rapidly growing population, large hydrocarbon reserves, and a strategic geopolitical location. The Arab states of the Gulf are high-income countries with relatively small populations. Saudi Arabia is the biggest economy in the MENA region and ranks in the world’s top 20 economies. Iran and Egypt are the countries in the region with the largest populations, together having around 40 percent of the total population of the region. MENA accounts for 35 percent of global crude oil production and 53 percent of global reserves. The oil industry dominates most GCC economies and Iraq, while through diversification service sectors have grown rapidly in the GCC. Iran has the most diversified manufacturing base in the MENA region, while agriculture is still important in North Africa. Saudi Arabia, Qatar and the UAE are in the top 30 countries globally in terms of quality of hard and soft infrastructure and global competitiveness ranking.
Steel demand in the MENA region has indicated very strong growth in the past decade. Construction is responsible for over 90 percent of steel demand in all MENA countries except Iran. After 2008, growth in steel demand slackened somewhat due to slower economic growth, lower oil prices and political upheavals in North Africa. Iran has the highest steel demand in the region due to its large and diversified manufacturing sector, while the GGC countries have the highest steel use per capita reflecting their infrastructure investments and efforts toward economic diversification.
Steel capacities in the region - EAF- and DRI-based - have been growing rapidly. The growth in steelmaking capacity had failed to catch up with demand until 2010, while capacity utilization has declined in recent years. EAFs are preferred due to lower capital expenditure and cheap energy in the region, while DRI is the preferred feedstock due to the low cost of natural gas and the scarcity of scrap regionally. The MENA region is currently the world’s second-biggest importer of steel after the ASEAN region, mainly importing from Turkey, the CIS, and Europe, with China also increasingly exporting to the region.
GCC
The GCC countries have improved their economic fundamentals and business environment and have a strong financial position, while they are now seeking to adapt to the weakness of oil prices. According to Global Insight, the region’s economy will remain firm though slower in the medium term due to the private non-oil sector growth. The region’s growth potential is foreseen at four percent in 2018-25, slower than in the previous decade, with significant downside risks. Meanwhile, the UAE and Saudi Arabia together account for 80 percent of steel demand in the GCC. Steel demand in the region tripled in the 15 years up to 2015 to reach around 25 million metric tons. A drop of one percent was recorded in 2015, only the second since 2000, due to the drop in oil prices. The latest worldsteel short-range outlook foresees a continuation of the decline in demand until 2017. Steel demand in the GCC has room for further growth, but this is limited by the weak oil price outlook. Both residential and non-residential building construction might show moderate growth. The private non-oil sector will remain the main driver of growth, resulting in continuing growth in demand for non-residential structures. Infrastructure construction is to continue at high levels, receiving a boost from EXPO 2020 and FIFA 2022.
North Africa
North Africa is a relatively poor region with strong potential for economic growth, a burgeoning population (half of the region’s population is under the age of 25), and a massive infrastructure/housing shortage. However, it is faced with major socioeconomic problems; high unemployment, stark divide between urban and rural populations, large fiscal deficit and low savings, difficulties in doing business, and security risks (e.g., civil strife in Libya). According to Global Insight, North Africa will show strong economic growth in the medium term as the region overcomes its vulnerabilities. Its growth potential is estimated at around 4.5 percent in 2018-25, similar to the rate seen in the past decade. Stability will be the key. In terms of steel demand, Egypt and Algeria are the two biggest markets in the region, accounting for shares of about 50 percent and 25 percent respectively of the total steel demand of the region. The region’s steel demand grew by about 2.5-fold in the 2000-09 period to reach 20 million mt. Demand remained below the 2009 level up to 2013 due to protests, conflicts and uncertainty. The region is expected to show very strong growth in steel demand over the coming decade, with confidence and investment activity recovering. Due to severe shortages, investment will focus on steel-intensive infrastructure projects. Housing shortages will require expedited building activity, while the scope for manufacturing base expansion in the region also bodes well for steel demand. The worldsteel presentation by Dr. Han and Dr. Ciftci also pointed out that comprehensive reforms and FDI are required to boost investment in North African countries.
A major conclusion of the presentation is that construction will drive steel demand in the overall MENA region. In the GCC, there is further room for growth in both residential and non-residential building construction, with infrastructure construction to remain at a high level. In North Africa, housing demand and the infrastructure gap will drive very strong growth in steel demand.