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Steel Service Centers in the Middle East Gain Popularity as Demand for Steel Heightens, Finds Frost & Sullivan

February 3, 2014 - Dubai, United Arab Emirates

Macro trends like diversification of the economy into non-oil segments, a burgeoning Gen Y population, rapid urbanisation due to the Arab Spring, and the rise in infrastructural projects are driving flat steel consumption in the Middle East. These factors support growth in the region’s market for Steel Service Centers (SSCs). Customer preference too is shifting towards procurement from SSCs in a bid to reduce inventory holding, decrease processing costs, and facilitate the easy sourcing of coils.
New analysis from Frost & Sullivan ( Opportunity Assessment of Steel Service Centers in the Middle East, finds that independent SSCs accounted for 17.5 percent of the total flat steel supplied in 2013, and estimates the market to witness a compound annual growth rate of 3.3 percent till 2020. SSCs mainly service the consumer durables, electrical, construction, storage tanks and automotive sectors. Most service centers are located in the Kingdom of Saudi Arabia and the United Arab Emirates, the largest drivers of steel consumption in the region.
“Apart from the cost benefits obtained from supply through service centers, customers are favouring SSCs due to benefits such as flexibility, customisation, and value-added services,” said Venkatesan Subramanian, Vice President and Global Leader, Metals and Minerals Practice, Frost & Sullivan. “SSCs can also deliver smaller quantities as against steel producing companies, who generally take up only big orders.”
However, it is important that SSCs keep customer service turnaround times short and ensure quality, considering the complexity of the value chain and the lack of specific market linkages for steel supply through SSCs. Imports and the use of substitute materials too can be a restraint for steel supplied through service centers. Further, factors that affect overall steel consumption, such as slowdown in infrastructural investment and delays in project implementation, will dampen overall service center activity.
Nonetheless, steel plants are seeking to expand their retail operations in large markets by setting up more company-owned service centers or acquiring existing large service centers to improve their product margins. SSCs are also establishing backward integration by setting up cold rolling and hot rolling mills.
“SSCs will aim at engaging the value chain in a more active manner,” observed Subramanian. “As customers continue to adopt this route, service plants will look at collaboration or acquisition to maintain competitiveness in this dynamic market.”
If you are interested in more information on this Analysis, please send an e-mail to Tanu Chopra/ Paroma Bhattacharya, Corporate Communications, at  / , with your full name, company name, job title, telephone number, company e-mail address, company website, city, state and country.
Opportunity Assessment of Steel Service Centers in the Middle East is part of the Metals & Minerals Growth Partnership Service program. Frost & Sullivan’s related Analysis include: Potential Investments in LATAM Mining Industry, Production and Investment Forecast in Southern Africa's Coal Mining Industry, and Production and Investment Forecasts in Southern Africa's Steel Industry. All Analysis included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
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Opportunity Assessment of Steel Service Centers in the Middle East P7B7-113

Source: Business Wire India


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