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Opportunity Assessment of Steel Service Centers in the Middle East

  • December 2013
  • 48 pages
  • Frost & Sullivan
Report ID: 1938920

Summary

Table of Contents

Emerging Popularity of Steel Service Centres

Macro trends in the Middle East and North Africa, namely, economic diversification from non-oil segments, rising urbanization, socio-economic reforms, and development of infrastructure, have aided in the rising demand for steel. The Arab Spring revolution will continue to shape the development of the region. Steel service centers (SSC) are the preferred delivery route for steel, as they offer customers convenience and flexibility in quantity and sizes. SSC helps reduce lead times and processing costs. Key end-user segments are manufacturers of consumer durables, construction, electrical equipment, and storage tanks. Steel is an indicator of a nation’s development and, therefore, SSC will aid in shaping MENA’s economy.

Opportunities for Steel Service Centers

Customers prefer material procurement from Steel Service Centers, (SSC) which are expected to benefit from capacity ramp-up of steel mills.

Key Advantages for Steel Service Centers:
• Flexibility
• Prompt Delivery
• Efficient Inventory Management
• Reduced Tolerances
• Optimal Utilization
• Product Customization
• Closer Touch Points with Customers

Key Growth Prospects
•X?% CAGR growth in SSC expected for 2013–2020
•X?% of the MENA flat steel demand is catered to by SSC
•X?% of the flat steel in MENA is imported
•X?%– % of the demand is contributed by the UAE and KSA

Macro Trends and Micro Implications on Steel Service Centers

SSCs are gaining popularity in MENA

From Macro Trends
Economy: Diversification of economy into non-oil segments
Urbanization: Rise of Megacities and Mega Corridors
Socialization: Socio-economic reforms and inclusiveness policies due to the Arab Spring protests
Infrastructure: Sophisticated infrastructure—metros, railway tracks, and highways

To Micro Implications
Economy: Investments into the automotive and manufacturing sectors will increase the demand for steel
Urbanization: Industrial growth is likely to be spread out. There is a need for steel service centers to be in proximity to customers. Steel demand is expected to be driven by electrical, HVAC, construction markets
Socialization: Steel demand will rise exponentially, as rebuilding cities will be a priority in the coming years
Infrastructure: Infrastructure will continue to have a direct impact on demand and growth of steel

Key Findings: CEO’s Perspective

1. Contribution of oil exports to the GDP of most oil-exporting countries in MENA is expected to decline significantly by 2020, with an increase in GDP contribution from manufacturing and infrastructure.
2. More than X% of the total population in four MENA countries—Qatar, Kuwait, Bahrain and Lebanon, is expected to live in urban areas due to accelerated development.
3. Gen Y is expected to account for more than X% of the total population till 2020. The Arab Spring will result in a gradual shift towards developmental activities.
4. Steel service centers are likely to gradually see upward/backward integration in value chain.
5. The growth potential of MENA’s steel industry in 2020 is high, as steel manufacturers are increasing capacity in view of increasing consumption.

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