Saturday, December 10, 2016
The financial affairs of numerous previously low-key unlisted or foreign-owned companies headquartered in Western Australia have been released by the Australian Taxation Office for the second year running.
Tuesday, January 29, 2008
Johnson in TBW on Arabtec.
Tuesday, August 01, 2006
GCC>Oil>Expected Revenues>2006/2005>$300b/$252b
Source : Gulf News quoting Org of Arab Petroleum Exporting Countries.
UAE>IND>Mobile Phones Reach> Per Capita SIM Card is 1.21 per resident.
UAE tops region's cellphone market |
By Mohammad Ezz Al Deen, Staff Reporter, Published: 07/31/2006 12:00 AM (UAE)
|
An Etisalat official told Gulf News yesterday the leading UAE telecom service provider's mobile subscriber base had recently crossed five million, taking the reach 121.81 per cent, much higher than its nearest competitor, This means, each UAE resident has more than one sim (subscriber identity module) card. It is, however, not very clear, how many of the five million sim cards are active as visitors usually subscribes to etisalat's pre-paid services for a short term before leaving the country. Some sim cards become inactive due to lack of usage. Etisalat said in May that the reach of its mobile phone service, with more than 4.7 million subscribers, had touched 100 per cent a projection based on a population of 4.7 million. This equation changed when findings of the census was announced on Sunday. According to the latest data, the UAE's population has reached 4.1 million, and that translates into a mobile phone service reach of 121.81 per cent. Experts predict a higher level in the coming months as the second telecom service provider, du, rolls out services later this year. A telecom industry expert, told Gulf News he expected these numbers and etisalat's positive results to put pressure on its rival. "Mobile market has reached a saturation point as every resident has more than one number in the country," he said. Du had said that it would try to secure 30 per cent of the UAE market between 2007 and 2009. Osman Sultan, du's chief executive officer, had said that the company would attract 10 per cent of the UAE mobile phone users in the first three years of the company's operations. "Even with this number of subscribers, we have a lot to introduce in the UAE's telecom market in fixed, mobile phone, data and internet services, besides satellite radio and TV broadcasting," he told Gulf News yesterday. -------------------- My Comments: 1.21 sim per resident is a data which needs further validation in my opinion. |
Sunday, July 30, 2006
UAE>Dubai>IND>Construction>2002-2004>Steel Prices
Source http://www.dcci.ae/content/doc/ResearchAndReports/Sectoral/Dubai-Construction-Sector-eng.pdf
Executive Summary
1. This paper focuses solely on steel market as it differs completely from other construction
material markets such as cement etc.
2. There is an estimate of 1,800 construction related companies in
specialization.
3. In the year 2002, completed buildings added up to 2,259 of which 1,558 were villas and
residential complexes, 412 were multi-storey commercial buildings, and 289 were industrial,
recreational and services buildings
4. The above Construction trend seems not to be specific to
such as
construction
5. As much as 80% of building materials utilized in construction projects in
imported, meaning that each price fluctuation world wide will affect directly
6.
7. World steel market demonstrates from 2001 to 2004 an obvious excess supply which should
have led to decreasing steel prices world wide. However, the situation is showing quit the
opposite. Steel prices continued to increase in 2004.
8.
2004, which makes it strongly dependent on imports.
9. In 2002 and 2003 price discrepancies between world market and
some specific steel products world prices are even higher than
holds for 2002 as well as 2003 and 2004.
10. These discrepancies are mostly attributable to usual factors associated with transport costs,
insurance and other transaction costs. Price discrepancies are to be found even within one
and the same market like
11. Price discrepancies at
a strong character of a turbulent market due to insecure supply and expected shortages. There
is no supply/demand-equilibrium expected soon
12.
6
13. Local price increases between 2002 and 2003 were spectacular ranging from 10 to 41 percent
and from 8 to 33 percent world wide.
14. Furthermore, price increases from December 2003 to January first 2004 were for
between 4 and 27 percent
15. This means that price pressure is a global market problem and not specific to the
or to
16. Cost of steel is about 25 to 30 percent of the total building cost1, which means for example if
steel price increases by 50 percent then the construction cost price will increase by 12.5 to 15
percent
17. Production of steel requires the availability of raw material such as
Coke the fuel furnace for foundry. Prices of all these raw material went up. The benchmark
price for
encountering shortages in production due to the increase of world demand,
responsible for 15 percent of global consumption (400 Mln. Tones)
18. Shipping steel and the required raw materials and increased demand world wide has resulted
in slow shipping movement, delayed deliveries and subsequent hike in price bids by traders
19. Shipping capacity shortages resulted consequently in higher shipping costs in addition to
higher insurance costs due to increased insecurity world wide
20. Speculative attitude of steel producers, and traders due to the fear that market situation will
endure adds to the steel price hike
7
Recommendations
1. Construction companies are urged to cooperate and initiate long-term joint procurement
projects, at
more powerful in determining prices as well as quality and condition for delivery.
2. Steel traders, contractors and government should initiate local and regional price agreements
to alleviate price discrepancies and enhance stability in the market. This can be achieved
through agreements on a fixed minimum and a maximum range to allow for price
fluctuations. These agreements should be continuously monitored and adjusted depending on
new developments and new global market conditions. These agreements will help reduce
price exaggerations.
3. Take away all entry barriers for potential new steel traders to open market and enhance
transparency in price setting.
4. Introduce flexible contracting and exclude steel from quotations to limit price competition
amongst contractors on steel and ease pressure on supply and demand.
5. To start exploring new alternative construction material and methods such as the introduction
of load-bearing concrete masonry and to put up high strength masonry wall and spread the
columns out.
8
Table of Contents
Executive Summary (Arabic) ............................................................................................. 2
Executive Summary (English) ........................................................................................... 5
1. Introduction ..................................................................................................................... 9
1.1 Data and Method ........................................................................................................... 10
2. Background of the Construction Sector ....................................................................... 11
3. Steel at World Market, ME and
3.1. World Market ............................................................................................................... 14
3.2. Steel at Middle-East Market ....................................................................................... 15
3.3. Steel Products and
4. Determinants of Steel Prices .......................................................................................... 20
4.1. Raw Materials .............................................................................................................. 20
4.2. Other Factors ............................................................................................................... 22
Evaluation and Recommendations .................................................................................... 24
9
1. Introduction
With the discovering of oil in the late 1960s, the construction sector in the UAE started
expanding rapidly. Lacking infrastructure at the time and the need for the establishment of a
sound economic environment, made it necessary that sufficient resources were allocated to the
construction sector, and the resulting demand led the sector to become one of the largest
economic sectors in the country.
The Emirate of Dubai, in particular, has had a history of rapid change. Within the span of 35
years,
landmarks. Having gathered momentum over the previous 15 years, fed by revenues from other
sectors and oil, the construction sector has grown to large proportions in
However, during the last 3-5 years, prices of construction materials witnessed an obvious
increase at both local and international market, the fact which should have affected the
production costs for the whole sector negatively.
The objectives of this paper are to monitor the recorded price fluctuations of a major
construction material which is steel, and determine the factors behind these fluctuations. We
intend to find answers to the following research questions:
1. What is the size of the production and consumption of steel in
markets?
2. To which extent did the prices of steel fluctuate during the last three years?
3. Which factors determine price fluctuations of steel materials?
4. Which of these factors relate to international markets and which to domestic & regional
markets?
5. To what extent does the price of steel affect costs of construction?
10
1.1. Data and Method
This limited market monitor relies on available data world wide and primary data collected
directly from the field through a qualitative survey amongst steel traders in
international data is concerned the study mainly relies on data from the MEPS2,
Steel Prices, and Iron and Steel Statistics Bureau. These prices are normally rounded up,
calibrated and usually forecasted, and should be therefore treated carefully.
The purpose of the qualitative survey was to add value to existing international data and
check for its validity as far as
developed to cater for concrete specific questions regarding steel price fluctuations. The
questionnaire has been sent to about 100 steel traders and 100 construction companies in
The latter has been followed up with an interview regarding price fluctuations and the
perceived reasons behind. A number of extended discussions with senior experts in the field
complemented the survey by adding new insights available amongst those informants.
This paper is organized as follows. Chapter two will review the construction sector, its
economic background, and economic perspectives. Chapter three will be devoted to the
production and consumption of steel world wide and in the
will discuss the determinants of steel price increases and chapter five will evaluate the
situation and draw conclusions and present recommendations.
2 MEPS International Ltd, Steel Industry and Market
11
2. Background of the Construction Sector
construction sector, and accounted for about 30 percent of its employment. The GDP of the
construction sector of
showing that demand for new building is increasing steadily.
Table 1: GDP of the Construction Sector at Factor Cost,
1998 1999 2000 2001 2002
UAE total GDP (inclusive oil) 177,360 201,797 257,979 254,236 260,648
UAE construction 16,392 16,621 16,857 17,446 17,988
Source: Ministry of Planning (Value in AED Mln.)
Table 2: Employment of the Construction Sector,
Year 1998 1999 2000 2001 2002
UAE Total Employment 1,437,623 1,631,764 1,737,771 1,929,022 2,030,536
UAE Construction Sector 257,300 270,765 287,198 305,477 320,184
Source: Ministry of Planning
construction sector by 25% in the year 2002. The figure increased for
with an annual average of 7% showing that the investment in this sector is increased
considerably.
Table 3: Fixed Capital Formation 1998 – 2002
Year 1998 1999 2000 2001 2002
UAE total ( inclusive oil) 52,195 53,916 57,398 60,178 61,779
UAE Construction sector 2,725 2,870 3,050 3,043 3,068
Source: Ministry of Planning (Value in AED Mln)
The construction market comprises three core segments: (a) civil infrastructure such as roads,
bridges, telecommunications, industrial parks, free trade zones, hospitals, sports & leisure
facilities, etc. promoted by the government; (b) commercial and residential projects developed by
12
the private sector; and (c) industrial developments promoted by both the government and private
sectors. In the commercial sector, hotel and leisure developments are seeing rapid growth. The
push to develop
development of the hospitality and leisure sector.
The construction industry consists primarily of international companies in partnership with local
businesses. According to
companies in
added up to 2,259 of which 1,558 were villas and residential complexes, 412 were multi-storey
commercial buildings, and 289 were industrial, recreational and services buildings. Moreover,
5,801 flats and 782 shops were completed in the same year3.
Due to the general lack of availability of product and skills supply in
placed on imported materials. As much as 80% of building materials utilized in construction
projects are imported, which means, each price fluctuation in the prices will affect directly
market. Moreover,
international players, which adds to more pressure on profit margins in the sector. For these
reasons among others, price of construction materials is a most important determinant of the
economic performance of the sector.
projects announced on weekly basis, and new very large planned projects for the coming years
put even more pressure on the demand for construction materials and subsequently prices of
these materials.
Major infrastructure projects continued to attract Government and private investments. Growth
in tourism and leisure, the development in manufacturing, expansion of the Free Trade Zones,
the construction and expansion of airports, industrial parks, hospitals, schools, hotels, golf
courses, sports stadiums just to mention some, have kept up the momentum in construction.
3
13
In times of noticeable price increases of the construction materials, recent indications show that
price changes into consideration. This means that
companies have to compete even more in terms of price or fully charge the price increases to the
consumer.
Among the major projects which seem to continue as planned, determining the new level of
demand for the construction materials and are considerably underway are the further expansion
of
Palm ($3 billion), the Dubai Marina ($10 billion), the
Financial Centre (DIFC), the Emirates Hills and
The above trend of the construction sector seems not to be specific to
countries such as
in construction. The
few examples. Seemingly, this construction trend is expected to put even further pressure on
demand for construction material and subsequently result in more spectacular price increases in
the region.
14
3. Steel at World Market
3.1. World Market
A first quick scan demonstrated that a major construction material which is very sensitive for
price fluctuations is steel. Steel materials are very important to the construction sector and any
changes in supply and demand for steel will affect the whole sector. Some of these steel
materials are manufactured regionally and the majority is imported, either as final or bi-products.
World production and consumption of steel determine supply and demand for this product. Table
4 below shows the production and consumption of this material in the world market.
Table 4: World Production & Consumption of Crude Steel, 2000-2004 (Mil. Tons)
2000 2001 2002 2003 2004*
production 847 850 902 970 1016
Consumption 867.3 780 831 884 936
Excess supply -20.3 70 71 86 80
Source: MEPS
* Estimated by MEPS
Fig. 1: World Production & Consumption of Steel, 2000 -
2004
0
2000
year 200year 2000 year 2001 year 2002 year 2003 4
Mil. Tons
Production Consumption
15
World steel production increased with an annual average of 5 percent from 847 Mln. Tonnes in
2000 to 1016 Mln. Tonnes in 2004. It recorded over this period an increase of about 20 percent.
On the other hand, world steel consumption increased from 867.3 Mln. Tonnes in 2000 to 936
Mln. Tonnes in 2004 meaning an increase of 8 percent with an annual average increase of 2
percent.
From supply-demand point of view, world steel market demonstrates from 2001 to 2004 an
obvious excess supply which should have led to decreasing steel prices world wide. However,
the situation is showing quit the opposite of that. But what is the situation at the level of the
3.2.
The
percent namely, from 10.8 Mln. Tonnes in 2000 to 14.5 Mln. Tonnes in 2004, which means an
annual average increase of 8.6 percent.
Table 5:
2000 2001 2002 2003 2004*
Production 10.8 11.7 12.4 13.6 14.5
Consumption 19.4 21.5 21.7 23.4 * 24.4 *
Excess demand 8.6 9.8 9.3 9.8 9.9
Source: MEPS
* Estimated by MEPS
On the hand, the
19.4 Mln. Tonnes in 2000 to 24.4 Mln. Tonnes in 2004 with an annual average increase of 6.4
percent, showing that the
period.
It is obvious that the excess demand in the
steel market for its imports, and that world prices are given for the
16
Nevertheless, both, world and
and consumption growth rates, based on the abovementioned data source, are natural and that
there are, as far as supply and demand of crude steel is concerned, no serious problems to cause
excessive price increases.
But before going any further, let us consider in the next section the extent of price discrepancies
by specific steel base product.
3.3. Steel Products and
Steel products are divers. They serve different sectors but are significantly related in terms of
price as the raw materials utilized for production is the same. Relevant is indeed to review steel
products as substitutions in production is obvious and feasible depending on market demands for
specific products.
In 2002 and 2003 price discrepancies between world market and
some specific steel products world prices are even higher than Dubai CFR prices, and this holds
for 2002 as well as 2003 and 2004.
Table 6: Steel Prices per Tonne by Specific Basic Product (US $), 2002-2003
As by Dec. first 2002 As by Dec. first 2003 As by Jan. first t 2004
CFR*
World** CFR
World CFR
World*
Reinforcing Bars 265 262 345 334 430 364
Beams – channels 290 339 410 411 440 453
Wire Rod 275 274 360 328 410 356
Hot Rolled Plates 285 327 397 378 435 412
Hot Rolled Coils 300 328 365 364 390 400
Cold Rolled Coils 395 409 465 445 485 488
Hot Dip Galvanized, CR base 505 479 560 520 580 566
Stainless steel HR coils 304 base 1475 1470 1925 1961 2450 2137
* Source: Me steel.com – steel prices in the ME Dec. 2002 & 2003
** Source: meps.co.uk – world steel transaction prices, 2003
*** World prices are averages
17
One could infer that existing price discrepancies between world market prices and the Middle
East market prices, which are ranging from 2 to 15 percent per Tonne, in specific cases of
products are assumed to be acceptable and form no threats to the
discrepancies are mostly attributable to usual factors associated with transport costs, insurance
and other transaction costs. The table below shows that price discrepancies are to be found even
within one and the same market like
Table 7:
31 Dec. 2003 29 Feb. 2004
Minimum
Maximum
Minimum
Maximum
Reinforcing Bars 400 436 500 545
Beams – channels 450 572 600 654
Wire Rod 408 410 545 560
Hot Rolled Plates 430 572 630 681
Hot Rolled Coils 400 490 550 610
Cold Rolled Coils 570 575 680 695
Hot Dip Galvanized, CR base 550 680 720 870
Stainless steel HR coils 304 base 2450 2500 2605 2725
Source: DCCI Basic Steel Products Survey-Dubai
Price discrepancies at
strong character of a turbulent market where significant price differences are to be found for the
same price and quality of a product. In such a turbulent market, prices are instable due to
insecure supply and expected shortages. There is no supply/demand-equilibrium and markets are
still searching for a steady state.
In cases of long lasting disequilibrium, it results, although temporarily, in the tendency of prices
to move further upward by 15 to about 40 percent (table 7). Similarly, table 8 shows percentage
change of steel prices for
2003 and Jan 2004. At first glance, the figures show a quit exceptional situation in the global
steel market. Local price increases between 2002 and 2003 were spectacular ranging from 10 to
41 percent and from 8 to 33 percent world wide.
18
Table 8: Percent Price Increases,
2002 - 2003
World
2002 - 2003
1 Dec.2003 –
1 Jan.2004
World As by
1 Dec2003.–
1Jan.2004
Reinforcing Bars 30% 27% 25% 9%
Beams – channels 41% 21% 7% 10%
Wire Rod 31% 20% 14% 9%
Hot Rolled Plates 39% 16% 10% 9%
Hot Rolled Coils 22% 11% 7% 10%
Cold Rolled Coils 18% 9% 4% 10%
Hot Dip Galvanized, CR base 11% 9% 4% 9%
Stainless steel HR coils 304 base 31% 33% 27% 9%
Based on table 7
Furthermore, price increases from December 2003 to January first 2004 were for
4 and 27 percent and world wide 9 to 10 percent indicating that steel prices are still rocketing.
Table 7 shows that February 2004 was no exception for
increase even harder.
In spite of recent indications showing that world price increases are reducing somehow starting
in
The problem has been shown, however not to relate to price discrepancies, but merely to the
demonstrative price increases at the world market and subsequently at the
and
Middle East or to
But if so what is then determining the encountered excessive steel price increases?
19
4. Determinants of Steel Price Increases
4.1. Raw Materials
From steel supply and demand point of view at international market, it looks like world market is
still sufficiently coping to meet global market demands. However, whether this situation will last
for long, no body can tell. Steel consumption in
with recent production cuts in the
One thing is sure, the
the economic dynamics of the region into consideration it looks like it is nothing else than a
natural economic growth effect.
Crude steel prices have been demonstrated to increase sharply partly due to increased demand
from
Table 9 below list the quantity of raw materials required for the production of steel for the years
2001-2004.
Table 9: Steel Making Materials Mln. Tonnes, 2001-2004
2001 2002 2003 2004
Consumption 780 831 884 936
Production 850 902 970 1,016
Raw materials required
1.
2. Coke 300 315 340 355
3. Scrap 375 400 425 450
Source: Iron and Steel Statistics Bureau
Production of steel requires the availability of raw material such as
unlimited, then steel production will continue to increase in accordance with world demand up to
the point where initial price equilibrium will be achieved and price increases are corrected. Of
course, correction could take some time because the production capacity would require adjusting
to new levels of demand.
20
Unfortunately, the current world market situation is indicating a situation where these raw
materials could constrain any further increase in steel production and would even result in severe
shortages due the following factors.
What explains current steel price increases are possible shortages of the utilized raw material
500 million tonnes was shipped around the world.
about 200 million tonnes in 2004. While global
investment plans are in place for further expansion, it will take some time before it is so fare.
This is the result of situations where steep changes in demand occur and whereby production
capacity requires time to adjust to new levels.
Meanwhile the benchmark price for
higher than in 2003.
Scrap and Coke
Raw material Scrap is adding to the problem as well. Scrap is encountering shortages in
production and world consumption is increasing steeply starting with
for about 15 percent of global consumption (400 Mln. Tones), without overlooking
and
Major producers of Coke are
consumption, and the
bankrupt.
21
Shortage of raw material for the production of steel results in higher prices of these material and
subsequent steel price increases.
4.2. Other Factors
Shipping Capacity
Another reason for the remarkable price increases of steel is the limited dry shipping capacity
available world wide. Recent studies show that as much as 500 million tonnes a year
150 to 200 million tonnes of Coke has to be shipped yearly across the world. However, the
annual global shipping capacity available does not exceed 600 million tonnes. Result is strong
shipping under capacity with the implication of increasing shipping costs and higher costs of
production for steel4.
Transportation Costs
It seems like transportation costs have fueled further steel prices due to high insurance costs in
addition to fuel costs.
Speculative Trading Market
Another explanatory factor is the speculative attitude of the suppliers of these raw materials
which is in fact based on their short-term expectations with respect to shortages and associated
repercussion for the steel market. Consistently steel producers and traders are surcharging the
market for their products because of the fear that the situation will require time before it recovers
in addition to the risks resulting from the very volatile market.
4 Iron and Steel Statistical Bureau, 2003
22
Some experts argue that raw material cost of steel is about 25 to 30 percent of the total building
cost5, which means for example if steel price increases by 50 percent then the construction cost
price will increase by 12.5 to 15 percent.
Therefore, Initiative are being taken in the
and contractors to find alternatives to steel such as load-bearing concrete masonry and to put up
high strength masonry wall and spread the columns out. This solution is being assumed to reduce
the quantity of steel required for construction and lower the costs.
Many construction companies’ world wide initiate new contracting measures to tackle contract
risks associated with steel volatile market such as excluding quotation of steel or including it for
a limited validity periods.
5 National Concrete Masonry Association, www.ncma.org
23
5. Evaluation and Recommendations
It now seems that serious shortages of basic steel making supply materials are likely to constrain
steel production to a point where steel supply may be unable to meet demand in the future, which
makes it an additional reason for exaggerated price increases.
A warning to all construction companies to take their measures to face this crisis is in place. Of
course the crisis will have even more impact on small and medium sized construction companies
which can not afford to buy big quantities directly from major suppliers, and they can’t even
guarantee prices for more than one week to their clients. Consequently, they will be obliged to
pass on the full price increases to the costumer which will some times impact on their
competitive offers.
These are therefore urged to cooperate and initiate long-term joint procurement projects with
major steel suppliers at
determining prices as well as quality.
Steel traders, contractors and government should initiate local and regional price agreements to
alleviate price discrepancies and enhance stability in the market. This can be achieved through
agreements on a fixed minimum and a maximum range to allow for price fluctuations. These
agreements should be continuously monitored and adjusted depending on new developments and
new global market conditions. These agreements will help reduce price exaggerations.
Take away all entry barriers for potential new steel traders to open market and enhance
transparency in price setting.
Other measures are to introduce more flexible contracting and exclude steel from quotations to
limit price competition amongst contractors and ease pressure on supply and demand.
24
Significant is as well to start looking for alternative construction material and methods such as
the introduction of load-bearing concrete masonry and to put up high strength masonry wall and
spread the columns out.
