Study Report Steel
Rolling Sector
8 March 2008
 Introduction
Rationale for The Study
Report Objectives
Coverage
Marketing Brochure
Introduction
The efforts of the GCC nations to diversify
their economies from oil and natural gas, and
the availability of considerable monetary
surpluses, have led to a boom in investment in
diverse sectors. Major investments are taking
place in petrochemical complexes. The natural
advantage of comparatively lower energy costs is
being leveraged in setting up metallurgical
units for the production of aluminum and steel,
which have high energy usage. Massive
investments are also taking place in
infrastructure projects such as airfields,
ports, power plants and desalination plants. In
addition to major real estate developments which
are creating entirely new cities, several mega
projects are underway to provide resorts and
residential accommodation for international
tourists and home owners. It is estimated that
there are presently over 1.2 trillion dollars of
projects under execution and this figure is only
expected to rise as oil prices continue to be
buoyant. Most forecasts predict oil prices to
continue to remain above the 60 dollars per
barrel limit, thus continuing to result in
massive surpluses in the GCC economies.
All these factors have resulted in a huge spurt
in construction activities in the region and as
a consequence there has been a sharp rise in
steel consumption in the region. Local producers
of steel have increased production to meet the
growing demand. However despite an impressive
growth of steel production in the region, the
consumption has by far outstripped the domestic
production. The production of steel in the GCC
region increased by 21 % between the years 2001
and 2005, the consumption of steel during this
period, however, saw an increase of 64 %. This
has led to ever increasing imports of steel in
to this region.. Imports of finished and
semi-finished steel in to the GCC region was
over 13 million tons in 2005. Fig 1 depicts the
growth in production, consumption and imports of
steel.
The steel industry has taken note of the
continued growth in steel imports and a number
of projects have been planned and are under
implementation. It is estimated that in the next
2-3 years about 10 million tons of new steel
capacity will be created in the GCC region
.
Fig 1: - Production, consumption & imports of steel
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The new projects under implementation fall into two categories. One category is that of integrated steel plants which will have direct reduction plants feeding direct reduced iron to electric arc furnace shops to produce steel. Most of these plants have planned rolling mills to convert the steel into finished product; however some will produce intermediate products such as billets or blooms for sale.
The other category is projects which envisage setting up of only rolling facilities. These projects plan to produce finished steel products for sale from purchased raw material in the form of billets. Some of these rolling mills are linked to steel making units belonging to the same industrial group whereas others will procure billets from the open market.
A common factor amongst all these projects is that except for a part of the capacity expansion at Hadeed in KSA, which is for flat products, all the other plants plan to produce long products, primarily reinforcement bars.
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Rationale for The Study
There are two important aspects to consider when looking at the future of the steel industry in the gulf region. One is the demand factor and the other is the economics of production in this region.
During the period 2001-2005, the world has seen a sustained growth in consumption of steel with an average CAGR of 8 %. During this same period the GCC region has seen a CAGR of over 17 % which is more than twice the world average. The IISI medium term forecast for world steel consumption projects a 4.9 % growth up to 2010 which is likely to come down to 4.2% in the period up to 2015. The level of economic growth in the GCC region will continue to be robust based on sustained high surpluses generated by oil revenues. This economic growth will in turn continue to fuel the construction boom as money is pumped into real estate, infrastructure and tourism projects. The growth in construction activities may slow down as compared to the heady rates of the last couple of years, but this sector will remain a key driver in the consumption of steel products. The increase in per capita income as well as the efforts to diversify into non-oil manufacturing sector will result in setting up of manufacturing chains to produce items of mass consumption by local industries. This in turn will lead to diversification in the requirement of steel products. As a result of the above factors, growth in consumption of steel will continue to be high and are expected to be much above world averages.
The main producers of steel in the GCC region follow the Direct Reduction route to produce iron which is then converted in to steel in electric arc furnaces. The direct reduction route utilizes natural gas as reductant and in areas where natural gas is available; it has been economically competitive to the conventional route of steel making through the Blast Furnace- Basic Oxygen Furnace route. Integrated steel plants however are very capital intensive to set up and need to be linked to natural gas sources; therefore the alternative of setting up individual stand alone rolling mill units is attractive. Besides the advantage of lower overall investment required, these rolling mills can also be located near the consuming market which is an added advantage.
Finished steel products are broadly classified as flat products and long products. The primary rolling mill for flat products is the hot strip mill. This mill by its inherent nature is of very high capacity, generally producing a minimum of 2 million tons per year. Recent development of the thin slab casting and rolling technique has given rise to mills of lower capacity of 1 million tons per year. These mills however are coupled to the steel making-casting unit and cannot be set up on a stand alone basis.
Mills for long products on the other hand are extremely flexible in terms of production capacity and allow for a very wide range of economical capacity for most of the products. This study therefore proposes to concentrate on rolling mills for long products.
As pointed out in the earlier section, there has been a rush of projects in the implementation phase. These have been driven by the boom in steel consumption and have been mainly focused on the production of reinforcing steel. Figure 2 serves as a broad example of the choices available to steel plants and rolling mills in terms of finished products which they can plan for. Given that the drivers for production of steel in the GCC region are very positive and that the market is likely to mature, it is appropriate at this time to take stock of the situation and chart out the products to be produced in future steel plants and rolling mills.
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Fig 2 - Long Product
Rolling Mills |
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Report Objectives
The objective of the study is to assess the
present status of steel rolling industries in
the GCC and identify further opportunities
considering the demand of rolled steel products
in the GCC and export possibilities in the
neighboring market. The Report will provide a
valuable aid for strategic planning purposes, at
a time of immense opportunities in the steel
rolling sector. The key issues that need to be
addressed include:
-
Global trend in the steel
rolling field
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Intermediate and finished
rolled products being manufactured in the
GCC
Status of steel rolling industries in the
GCC
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Intermediate and finished
rolled products imported into the GCC
-
Identifying rolled steel
products that are not manufactured in the
GCC
-
Identify rolled steel
products that have good export possibilities
-
Identify opportunities for
investment in steel rolling sector and
formulate guidelines for planned growth.
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Coverage
The coverage of this Study Report has been
carefully formulated to address the critical
information requirement of key players from
all segments of the industry. Specifically
the research parameters will embrace:
Geographic Coverage
The Report will cover the dynamics of the
steel sector and consumption of finished and
semi finished steel products within the
following GCC States:
Bahrain
Kuwait
Oman Qatar
Saudi Arabia
United Arab Emirates
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STEEL ROLLING SECTOR IN THE GCC. A MULTI – CLIENT STUDY TO PROVIDE INVESTMENT
OPPORTUNITIES IN THE STEEL ROLLING SECTOR
Date: March 2008
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