UAE: Domestic ferrous scrap prices rise w-o-w; year-end market sees minimal bookings

In the United Arab Emirates (UAE), scrap prices in the domestic market have witnessed a slightly upward trend in terms of prices this week, with sluggish trade activities.

SteelMint's biweekly assessment showed an AED 8-10/tonne (t) slight uptick for HMS (80:20) processed scrap grade, maintaining a price range of AED 1,295-1,300/t ($353-354/t) DAP.

Market sources indicate a standstill in the current condition due to the Christmas and New Year holiday weeks. Despite this, mills are engaged in minimal volume procurement for the January production cycle.

According to SteelMint's Week 52 market survey, a couple of deals were concluded by Abu Dhabi-based mills. More than 2,000 t of processed PNS scrap were booked at AED 1,380/t on a DAP Abu Dhabi basis, whereas unconfirmed deals heard involving HMS (80:20) processed grade were sold at AED 1,280-1,300/t on a DAP basis.

Buyer and seller indications: A few sellers quoted AED 1,350-1,360/t for PNS, AED 1,330-1,340/t for processed HMS (80:20), and AED 1,430-1,450/t for shredded scrap on a DAP Abu Dhabi basis. However, buying indications suggested that HMS super/unprocessed grade is valued at around AED 1,210-1,230/t, whereas processed HMS is observed in the range of AED 1,280-1,290/t.

HMS (80:20) spread: The average spread between CFR Nhava Sheva HMS (80:20) and UAE local HMS (80:20) processed scrap prices in the current week dropped to around $35-40/t, witnessing a slight narrowing trend amid a fluctuation in price trend in domestic scrap prices. Imported HMS (80:20) prices into West Coast India remained steady at around $390/t, while UAE HMS (80:20) processed-grade scrap prices remained at around $353-354/t DAP.

As per a few market sources, the ban on exporting HS code 7204 (metal scrap) from Dubai persists until 19 December 2023, with no official extension announcement from Dubai Customs. Exporters face uncertainty, as the acceptance of shipments hinges on the importing country's regulations.

Exporting to India, a crucial market, is particularly challenging. Although Dubai Customs may clear shipments, entry into India is hindered by the Pre-Shipment Inspection Certificate (PSIC) requirement, leading to delays and rejections.

In response, some exporters explore Penang as an alternative route. However, this option comes with a substantial increase in freight charges compared to direct routes to India, impacting the profitability of scrap exports.

Recent updates on the Middle East region-

Saudi Arabia: As per market sources, Saudi Arabian scrap dealers are holding back supply, expecting a price increase in the new year. Instead of delivering standard HMS (80:20) scrap, they provide a mix of HMS (80:20) and lower-quality light scrap, equivalent to HMS (70:30). Despite the lower quality, dealers demand the same price as last week's HMS (80:20) deals, around SAR 1,530-1,540/t ($408-410/t) delivered, with hopes for a further increase to SAR 1,570-1,580/t.

This strategy poses a dilemma for steel mills, impacting their margins. The potential rebar price increase in the new year is likely to create uncertainty in the situation, contributing to volatility in the Saudi Arabian scrap market and affecting regional steel production costs.

In a recent development, Saudi Arabia is set to invest around $12 billion in steel projects to meet the surging local steel demand, driven by the economic diversification strategy outlined in the 2030 plan. The Deputy Minister of Industry and Mineral Resources, Khalid Al-Mudaifer, highlighted the ongoing large-scale projects, valued at more than SAR 5 trillion ($1.33 trillion), contributing to the increased steel demand, expected to rise by at least 150% in the coming years.

Saudi Iron and Steel Company (Hadeed) has lowered prices for rebar (12-32 mm) and wire rods (6.5 mm to 16 mm) for January production. Rebar is now offered at SAR 2,325/t ($619/t), down by SAR 75/t ($20/t) from the previous month. The wire rod is priced at SAR 2,400/t ($640/t), reflecting a reduction of SAR 50/t ($13/t) compared to the previous month. Prices are on a CPT Riyadh basis and exclude 15% VAT.

Bahrain Steel, a key iron ore supplier, is investing $250 million in environmental protection and decarbonisation initiatives. The project involves constructing a roof for the iron ore area, implementing a solar project, and allocating industrial land. Meshary Al Judaimi, Chairman of Bahrain Steel's Board of Directors, highlights the projects' importance in supporting Bahrain's aim for net-zero emissions by 2060, fostering sustainable development in the steel industry.

Saudi Arabia's Al Yamamah Steel Industries Co. reported a net loss of SAR 130.14 million ($34.6 million) for the fiscal year ending 30 September, 2023, compared to SAR 26.66 million in the previous year. The losses were driven by a 27.22% decrease in construction sector selling prices, despite a 27.30% increase in sales quantities. The subsidiary, Al Yamamah Company for reinforcing steel bars, contributed a net loss of SAR 92.278 million due to a sharp drop in rebar selling prices. Al Yamamah Steel specialises in manufacturing and selling various steel products for the buildings and infrastructure sectors.

King Salman Energy Park (SPARK) and Affordable Housing Company, a Bin Saedan Group subsidiary, are collaborating on a residential and commercial project. The $50 million residential complex, offering 459 apartments, targets long-term stays for businesses and is set for phased completion by Q4 2025.

Outlook: The UAE's domestic scrap prices are expected to experience minimal fluctuations and remain uncertain during the New Year holiday period. Market participants are anticipated to be inactive until the middle of next week, contributing to the subdued outlook in the domestic scrap market.