Yemen uprising disturbs steel market

By Mohammed al-Kibsi

Anti-government protests in Yemen have greatly slowed down the country’s steel market, with steel mills working far below their regular production levels while they seek to expand their export markets in order to break even, industry sources told MESteel (mesteel.com). The protests which broke out in all major cities across the country over six months ago have led to a virtual halt in many construction sites, which rely on rebars.

Estimates vary as to how much the local steel market has been impacted by the ongoing crisis. But some individual traders have reported a drop in trading activities by an average of 50 percent over the past months, while one steel importer said his sales have plunged by as much as 75 percent.

In the south of Yemen, were the steel industry is concentrated, production levels have declined by 60 percent to 80 percent, according to industry sources.

“Aden Steel was last year building up production towards its capacity level of 300,000 tons of rebars and 100,000 tons of billets, but since March when domestic demand plunged due to the crisis our production dropped by more than 60 percent,” Mohammed Al Maghrebi, managing director of the country’s largest mill, Aden Steel, told MESteel (mesteel.com) in a telephone call to Aden.

He estimated the overall steel market in Yemen to has fallen by more than 60 percent over the past six months.

Al Maghrebi explained that in response to a very weak domestic demand, the company decided to suspend production at the rebar rolling mill until market conditions improve, and instead focus on the production and export of billets. “With the profit margin narrowing down between rebars and billets, it has become more feasible to produce only billets for the time being,” he said.

“Now all our production for coming months is booked for export to rolling mills in Sudan and other neighboring countries,” Al Maghrebi said. Al Maghrebi also explained that steel prices in the Yemeni market tended to be much less affected by variation in international prices, and at a much slower pace, due to the nature of the market and resistance to price fluctuation.

Other mills, such as Arab Iron & Steel Corporation in Aden and Yemen Steel Manufacturing Company in Hodeida, were not immediately reachable to verify their conditions.

While steel mills have turned to boosting exports to whither the political crisis in Yemen, steel importers appear to have been left in the cold.

“During the first eight months of this year, we have made only a single sale in the domestic market – 4,000 tons of Turkish rebars. If the current situation drags on longer, this might be our only deal for the year, compared with 30,000-35,000 tons we usually sell annually,” Ahmed Karman, manager of the Sanaa-based United Trading Agencies, told MESteel in a telephone call to Hodeida.

“There isn’t really much we can do, except to wait and see. A few steel traders in the capital or other cities have even shut down their shops because of lack of business,” he added.

United Trading Agencies imports rebars mainly from Turkey and sometimes from China. It also trades in smaller amounts of coils, pipes and merchant bars.

“Making things worse, our overseas suppliers don’t have confidence any more in our situation or our ability to meet our commitments. Letters of credit are no more accepted. We have to pay in cash and in advance,” Karman said. “That’s why whatever stocks available in the market have gained more value,” he added.

Another company based in Sanaa, Yahya Salman, which buys from agents and mills to sell to consumers, said their sales have dropped by 40- 50 percent. The company trades mainly in rebars and light-to-medium sections.

Dwindling demand for rebars in the Yemeni market did not depress their prices. In fact prices have been rising in proportion with their regional levels – and sometimes higher during the current political crisis. According to market sources, domestic prices of imported rebars have risen from 160,000 YER per ton ex-warehouse in the begining of 2011, before the start of protests, to 200,000-210,000 YER ($851-$893) per ton ex-warehouse this week.

Due to a combination of real and perceived higher quality of imported rebars, locally produced rebars have on average been priced at around $100 per ton less than imports.

Imports of semi-finished and finished steel products in Yemen have dropped from their peak level of 800,000 tons in 2009 to just over 500,000 in 2010, according to the Brussels-based World Steel Association. They are expected to diminish much further this year.

$1 = 235 YER

Source: MEsteel.com