UAE: Domestic ferrous scrap index slips $6/t w-o-w, hits 3-week low on weak demand

BigMint's UAE domestic ferrous scrap index dropped by AED 22/tonne (t) ($6/t) w-o-w, reflecting weak demand driven by a stagnant market and need-based buying. Additionally, prices have fallen to their lowest levels in three weeks, reaching figures last seen on 2 September 2024.

Most Gulf central banks lowered their key interest rates in the middle of the week, following a 50 basis point (bp) cut by the US Federal Reserve, credited to increased confidence in inflation management.

The UAE Central Bank also cut its base rate by 50 bps to 4.90%, effective Thursday.

This reduction will bring down interest payments and keep mortgage rates for 2024 more affordable, boosting accessibility in the real estate market and, hence, the consumption of rebars and other steel products.

A trader observed, "Market prices have currently reached their lowest point, and we expect to see some improvement soon. Additionally, the recent interest rate cut by the Federal Reserve is a significant factor with global implications. It is expected to stimulate construction activity, which will, in turn, boost steel demand."

BigMint's bi-weekly assessment showed a w-o-w decline in HMS (80:20) processed scrap prices to AED 1,227/t ($334/t) DAP Abu Dhabi from AED 1,249/t ($340/t) in the previous week.

In BigMint's Week 38 market survey, nominal trade activity was observed, with around 4,000-5,000 t of HMS processed and shredded scrap traded at AED 1,225-1,230/t and AED 1,300-1,310/t, respectively, on a DAP Abu Dhabi basis.

UAE steel market trends

This month, rebar consumption is estimated to be at around 270,000 t. Notably, a benchmark mill proposed a net price increase of AED 74/t ($20/t) and sold 145,000 t in the first week.

Meanwhile, other suppliers raised their prices by AED 35-50/t ($9-14/t), with transactions between mills and traders taking place at AED 2,150-2,160/t ($585-588/t), the higher end being for Omani suppliers. Retail prices also rose AED 35-50/t, with key products offered at AED 2,350/t.

Additionally, hot rolled coil (HRC) trade activity in the UAE remained sluggish, despite a further decline in offers from China. Due to weak local demand and fluctuating import prices, particularly for material from China, Emirati buyers have been hesitant to make purchases this week, choosing instead to observe market trends.

Recent market developments

A leading property developer in the UAE has signed a land lease with Khalifa Economic Zone Abu Dhabi (Kezad) to build a rebar rolling mill. The company has applied for a 300,000-sq-metre plot to construct a facility with a capacity of 600,000 tonnes per annum (TPA), aiming for production to start by late 2026.

Meanwhile, a local investor and an Indian metals firm are establishing an induction furnace mill in Al Ain for producing 12-metre-long billets with a capacity of 5,000 t per month. This mill is set to begin operations in May or June.

Export market

Ferrous scrap export demand was sluggish, with prices remaining at the same levels as in the previous week. Buyers are being very selective, particularly those from Pakistan, where bid prices for shredded scrap are being pushed down to $380-385/t CFR Qasim.

Meanwhile, no firm offers were heard for UAE material to Bangladesh and India.

HMS (80:20) spread

The average spread between CFR Nhava Sheva HMS (80:20) and UAE local HMS (80:20) processed scrap increased to approximately $28-32/t, following the drop in the UAE's domestic scrap prices. This week, imported HMS (80:20) prices, CFR west coast India, stood at $363-365/t, while UAE HMS (80:20) processed scrap prices declined to $334/t DAP.

Outlook: Industry experts anticipate a potential uptick in domestic ferrous scrap prices in the coming weeks. Additionally, rising finished steel prices could bolster scrap procurement rates for major mills, providing further support to the market. The ongoing export market slowdown is expected to stabilise domestic scrap supply.