Will COVID-19 re-mould UAE steel?

Published: 7 May 2020 - 8 a.m.

The ongoing COVID-19 pandemic has impacted varied sectors' outputs and deliveries; artificial demand, supply chain, and manpower restrictions are looming over the steel industry in the region, UAE's key players tell Construction Week.

The global crisis has sent certain countries into lockdown, caused border closures as well as travel and entry restrictions and the UAE's steel industry has had to bear the brunt and taken a hit as well.

The chief executive officer of Dana Steel, Dr Ankur Dana tells Construction Week that while not very significant, there has been a drop in prices in the steel industry.

Among the logistical issues that currently obstruct the smooth functioning of the industry is "the closure of boundaries of various countries, causing an artificial demand of steel in certain regions, while an oversupply in others," he adds. "We previously saw a lot of consolidation in the industry and we see that would be the trend going forward as well.”

Dana Group is a UAE-based stockist for flat steel products; it specialises in the manufacturing of sandwich panels, fencing, profiles, and cable trays. In addition, the company supplies steel coils and sheets to MEP and main contractors, Dr BS Dana, chairman of the group tells Construction Week.

"We also recently completed the commissioning and commercial production for Phase 1 of our Dana Steel Industry, as well as Dubai Industrial City Steel mill project, which included completing record orders for the Colour Coating Steel Mill complex in Dubai Industrial City."

Tracing the trends in an industry is possible when the industry and market sentiment, in general, is volatile or dynamic. However, the sudden and harsh impact of the pandemic has seen many industries come to an abrupt halt.

Stating that the trends in the steel industry were "positive" till the outbreak of the novel coronavirus, M Zubair, general manager of German Steel Contracting, which was heavily involved in the steelworks for several pavilions at the Expo 2020 Dubai says that new project awards have now seen postponements, with no major order confirmations in March and April.

Is COVID-19 spelling trouble for UAE steel?

Noting the impact of the pandemic on Dana Steel's operations, Ankur says, "The main challenges that we're currently facing are in supply and manpower. In addition, we are facing problems in terms of transportation for our employees; our day-to-day operations have been affected because of the limited transport options available.

"We are experiencing some hiccups in terms of receiving payments from our clients. Also, movement of our goods to clients in the GCC regions including Bahrain and Kuwait are suffering due to the closure of boundaries and restricted movement."

UAE-based German Steel Contracting has worked on several Expo 2020 Dubai pavilions including Korea, Netherlands, Brazil, Azerbaijan, Slovenia, USA, as well as Abu Dhabi's Reem Mall and Ras Al Khaimah's Movenpick Hotel.

Addressing the considerations about the potential postponement of the Expo 2020 Dubai, Zubair, general manager of the company says: "If delivery dates for the awarded pavilions are extended, planned production speed will have to be reduced which we will not prefer. We will move ahead considering the same delivery dates, with the hope that it will not change."

The construction industry - which was identified as one among the region's vital sectors - was exempted from the government's prescribed restrictions on movement and operations, in light of the COVID-19 outbreak.

However, the imposed movement restrictions has hampered German Steel Contracting's shipping to site and between the plants, Zubair tells Construction Week. He further notes that absenteeism in the company is at its peak, due to the fear surrounding COVID-19, with 30-40% staff members off for the most part of the day.

"Staff and labour transport is costly and time-consuming during this time, due to the movement restrictions and new safety rules. Moreover, many main contractors are using COVID-19 as an excuse to stop or delay payments, which, in turn, is affecting our operations."

Noting that most of the challenges faced by the company point towards the ongoing pandemic impact, general manager of Standard Steel Fabrication, Ravi Chander identifies a general unavailability of high-end section material from European countries as well as the postponement in the scheduled delivery of high-end raw material. The issues, Chander notes, is resultant of nationwide lockdowns and imposed restrictions on import.

Shifting the focus to Standard Steel Fabrication's internal operations, Chander tells Construction Week: "We are concerned about the health and safety of our technical staff who work on-site. All the non-technical staff have been advised to work from home. Work hours have been brought down by 80% of regular hours, and a significant amount has been spent on transportation since travel is essential for 50% of the company staff.

Slowdown of output and deliveries

Stock piling and excess inventory are seemingly the byproduct of COVID-19, as viewed from the manufacturing lens.

Dana Group has faced stock piling on both, finished and unfinished products, Ankur says.

"Apart from local supply, we also export goods to various GCC and Arab League countries. At the moment due to transport restrictions, many of our overseas clients are unable to pick up the goods, so we are having a slight excess inventory of steel coils, sheets, and also our end products."

With the construction industry having remained open in the UAE while several other sectors witnessed limited operations, Chander notes that Standard Steel's output was not impacted, but delivery of material took a hit.

Meanwhile, Zubair tells Construction Week that "around 20-30% output and deliveries at German Steel Contracting" have been impacted.

The future of UAE steel

"Uncertain present but positive future," Ankur predicts will be the overall sentiment in the industry, going forward.

"There will be a good recovery in the steel market by June-July, and once the boundaries open up, the supply chain will become streamlined, banks will work as normal, and companies will become more efficient to handle the steel orders worldwide, leading to the recovery of the market," he adds.

The region has partially relaxed restrictions that were earlier put in place as preventive measures to curb the impact of the COVID-19 outbreak. Once the restrictions are eliminated, "running projects can move in full swing," Zubair suggests, stating that the two months lag in acquiring new projects could impact the subsequent months and beyond if the situation does not "return to normality" soon.

Localisation of steel

In the post-COVID-19 world, will the steel industry eventually rise to the occasion by localising crucial material and adapting to newer technologies that eliminate the need for travel and imports or exports?

"We see further localisation of not just the steel industry but almost every industry. In the long run, every country should be self-sufficient, so it’s good that we have a local manufacturing facility, and the UAE government is doing a lot in terms of supporting the local industries," board member of Dana Group, Dr Ruchi Dana says.

Lauding the region's efforts to curb the impact linked with the novel coronavirus, with the implementation of a stimulus package and banks' offerings, she adds: "In the UAE, the AgriTech and hydroponics sector have been boosted, and we foresee similar support to all the core sectors and industries to build up the economy."

What's the way forward for the industry? "Once the global pandemic is over, things will come back to its original shape, except for financially, and there will be no requirement for the adaptation of new technologies," Zubair tells Construction Week.

Click here to add your comment

Please add your comment below
Your email address will not be published