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Kallanish Kallanish

Knowledge matters Knowledge matters

September, 22nd 2020

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MAY 14

UAE bans scrap exports on local shortage


United Arab Emirates has banned the export of ferrous scrap for four months effective 15 May. This is to ensure steelmakers have sufficient feedstock supply amid the Covid-19 pandemic, says UAE’s economy ministry.

The ruling affects all major scrap grades, namely those falling under HS codes 720410, 720421, 720429, 720430, 720441, 720449 and 720450.

UAE market participants tell Kallanish the move is the result of a scrap shortage in UAE due to the pandemic reducing collection rates. The three crude steelmakers in UAE are Emirates Steel and Arabian Gulf Industries, both located in Abu Dhabi, and Sharjah-based Shattaf Steel. Mills were reported to have reduced output in April as UAE economic activity slowed due to the Covid-19 lockdown. Operations are now recovering but “…very slowly,” says a Dubai-based trader, as it is still Ramadan.

UAE exports around 1 million tonnes/year of ferrous scrap, with the majority going to India and Pakistan. In 2019 India imported 1.15mt of scrap from UAE, flat on-year, according to India commerce ministry data.

Despite a large tonnage of scrap being generated in UAE, the majority of it is not used by local mills. There have been calls in recent years, not least from ESI chief executive Saeed Al Remeithi, for UAE mills to utilise more domestic scrap in steelmaking. In early 2018 ESI commissioned a new shredder with the intention of doing exactly that (see Kallanish passim).

The ban will help UAE billet producers procure scrap that “…would otherwise be exported to India and Pakistan at higher prices,” says a Gulf Cooperation Council scrap buyer. Moreover, “…mills will be able to reduce the lead time of their supply chain.” The move could be a test for a potential permanent scrap ban in future, such as the one in neighbouring Saudi Arabia, he adds.

In any case, scrap demand from the Indian subcontinent has been subdued in recent weeks due to Covid-19-related restrictions in the region. India Ratings and Research (Ind-Ra) said recently Indian steelmakers will face issues with manpower availability and excessive inventory as they bid to raise capacity utilisation following India’s relaxation of the Covid-19 lockdown.