Why did Steel demand Shrink in Arab Countries in 2019 ?
US and China have been locked in a trade dispute for more than a year. A recent UN study has shown that the trade war between the two largest economies in the world reduced US imports of Chinese goods subject to duties for more than a quarter by $35 billion in the first half of this year and raised prices American consumers.
If this fails, all US imports of Chinese goods in excess of $ 500 billion may be affected.
According to the study released by the United Nations Conference on Trade and Development (UNCTAD), US imports of Chinese commodities subject to tariffs declined to $ 95 billion in January-June 2019 from $ 130 billion in the same period of 2018.
US and China have been locked in a trade dispute for more than a year, but there are hopes that a deal can be signed that somewhat eases the crisis.
The International Monetary Fund recently announced its expectations for a decrease in the growth rate worldwide to reach 3.1% in 2019 and 3.4% in 2020 compared to expectations for the previous year, which amounted to 3.7% for the two years.
The current trade tensions represent a great danger to the Middle East and North Africa region if US follows the path of applying additional tariffs on Chinese goods, which increases pressure and influence on the Arab region, which is characterized by regional trade connections with China.
Oil price fluctuations increased and are still below the level compared to 2018 due to the expansion of the United States in shale oil production and the geopolitical tensions that occurred in the region, despite breakdown of oil production in Saudi Arabia and the ongoing conflicts in the region (Libya and Yemen), global oil prices have remained low.
Expectations of economic growth rates for the Middle East and North Africa region in 2019 decreased from 1.5% to 0.6% as a result of the drop in oil prices and lack of clarity in the reconstruction projects in Syria and Iraq and the persistence of political instability in the region despite the efforts made in economic reforms taken by many countries in the region This affected the demand of steel products in the region, which decreased by 7% in 2019.
The economic growth rate in the Gulf countries decreased to 1.1% in 2019 from 2% in 2018 as a result of the decline in oil revenues as a result of the policy of reducing production. This has been reflected in the steel demand . It is expected that steel demand rates will shrink by 8% in 2019, with a total demand to 16.4 million tons compared to 17.8 million tons in past year.
The economic growth rates of most North African countries except Egypt decreased, which led to a decrease in the economic growth rate for the region as a whole to 3.6% in 2019 compared to 4.2% in 2018, due to the exceptional political conditions in Libya and Algeria and the decrease in agricultural production in Morocco, which was reflected in the decline in demand of Steel products in the region in 2019 to 18.5 million tons, with a shrinkage rate of 7% compared to 20 million tons in 2018 due to the apparent shrinkage of demand in all countries of the region except Morocco.
Also, Britain’s exit from the EU may have a significant impact on the region, as a result of a general slowdown in economic activity across Europe, which has a direct impact with countries with close trade connections with Europe, such as Morocco and Tunisia. Also, there are several countries that are highly exposed to the risks of the British pound, such as Kuwait and Oman.
However, steel demand growth is expected to return to the countries of MENA , to rise by 2%, with an increase in domestic production to 2.6% next year.
Dr. KAMEL DJOUDI