The UAE: Domestic ferrous scrap index falls by $7/t w-o-w; export market faces Customs' scrutiny

The UAE domestic scrap index has fallen by $7/t w-o-w as the domestic scrap market is under pressure. Local mills are less active due to weak downstream demand. Major steel mills are quoting AED 20-30/tonne (t) above the standard market rates but these are lower than what they usually offer. It may be mentioned that the local mills' offers are always at a premium to the usual market prices.

As per market participants, increased scrap export offers from the UAE have prompted Customs scrutiny again after two to three months. To circumvent this, suppliers are reportedly rerouting scrap through other regions to avoid stringent checks imposed in the former.

BigMint's bi-weekly assessment showed a decrease of AED 26/t ($7/t) for HMS (80:20) processed, with prices in a range of AED 1,310-1,315/t ($357-358/t) DAP Abu Dhabi.

As per market insiders, in the UAE, shredded prices have recently decreased as bookings are predominantly from larger mills, indicating selective purchasing. Also, the last recorded prices were at AED 1,420-1,430/t but are expected to have fallen to AED 1,400/t this week. HMS-processed scrap workable prices have also dropped to AED 1,300/t with indicative levels at AED 1,310-1,320/t for HMS-processed and AED 1,410-1,420/t for shredded.

As per a trade source, there is a growing concern about non-metallic materials contaminating scrap, which poses risks for electric arc furnace (EAF) mills. The lack of rigorous grade checking before procurement exacerbated this issue.

As per BigMint's market survey for week 31, the trade volume was at around 5,000 t, comprising both HMS (80:20) processed and shredded scrap. Specifically, 2,000-3,000 t of shredded scrap were sold at AED 1,410-1,420/t, while approximately 2,000 t of HMS (80:20) processed scrap were sold at AED 1,310-1,320/t, on DAP Abu Dhabi basis.

Despite extreme weather conditions slowing down construction in the UAE, steel demand is moderate, with a positive outlook for the remainder of the year.

The rebar market is stabilising after a period of volatility. Recent transactions indicated a price range of AED 2,130-2,150/t ($580-585/t) delivered from major producers, closely aligning with mid-July levels. Retail prices have adjusted, with benchmark mill rebars priced at AED 2,270-2,290/t ($618-623/t) and other local sources at AED 2,180-2,200/t ($594-600/t). The gap between benchmark and secondary suppliers has narrowed, reflecting increased stability in the market.

UAE steel market trends

In 2024, the UAE steel market is undergoing a significant transformation, driven by substantial investments in green technologies and aggressive capacity expansion.

The sector is undergoing a transformative phase with key developments. Emirates Steel Arkan and Masdar's green hydrogen initiative represent a major step towards sustainable steel production, aiming to cut carbon emissions. The Ras Al Khaimah steel plant's expansion to 5 mnt annually by 2025 highlighted the UAE's strategic intent to dominate the global steel market. Additionally, the Abu Dhabi Investment Authority's focus on advanced steel technologies aims to boost innovation. Driven by urbanisation and major projects like Expo 2025, the UAE steel market faces challenges from global price volatility and stringent standards but remains poised for significant growth and leadership in sustainability.

Export market: Inquiries from India and Pakistan, which previously witnessed a buzz of activity, have also trickled down, exacerbating the current market scenario.

UAE-origin inquiries are declining as Customs enforcement tightened, with export cargoes under scrutiny for failing to meet criteria and duty requirements, raising concerns about material quality. The Pakistan steel market faces pressure from elevated freight costs, prompting buyers to explore alternatives in the UAE and other Middle Eastern regions, where freight expenses are comparatively lower.

It was heard from Bangladesh that containers are facing delays due to increased port scrutiny, making exporters cautious. The market is experiencing volatility, with new prices fluctuating weekly. Earlier deals included a 700-t UAE-origin HMS-PNS mix booked at $430/t CFR Chattogram followed by 500 t of UAE-origin PNS booked at $442/t CFR Chattogram.

Outlook: As per market insiders, scrap prices are going to soften in both the domestic and export sectors and moderate inquiries will be continuing from major mills for the upcoming production cycle. Despite a manageable situation in the rebar sector, there are concerns about other steel products. The influx of low-priced imports from Iran, Oman, and China, along with excessive volumes, could exert downward pressure on prices.