The UAE’s largest steelmaker Emirates Steel says it is now sharpening its focus on high-margin, high-strength value-added products (VAPs).

“The Middle East region imports most of its value-added steel and Emirates Steel believes it can capitalise by manufacturing these products domestically,” the company stated.

“We have been closely observing the benefits large steel producers in the world are reaping by progressively moving into value-added products and we are hopeful that by adopting this model we will continue to protect our bottom line amid the current challenging industry circumstances,” said Emirates Steel’s CEO Saeed G Al Romaithi.

Steelmakers globally are continuing to maximise cost-cutting, seeking to improve productivity and shifting focus to high-end value-added products, said a recent EY report, which estimated global demand for steel to grow faster in 2014 at 3.3 per cent with more demand growth expected outside China including India, Brazil, and Russia as well as emerging markets in the Middle East and North Africa.

VAPs are mainly finished steel and are termed so depending on their treatment or their end use. The products vary from sheet piles to high silica wire rod to long steel bars to alloy steel. The end users are primarily the construction and fabrication sectors. “Consumers are shifting to premium steel as it guarantees optimum returns on their investment,” pointed out Al Romaithi. This will eventually result in generating higher profit margins for the Senaat-owned steel company.

The primary focus of these product developments are stronger steels with higher tensile strengths and steels with special mechanical properties so that lesser quantity of steel is required by customers for similar applications.

Specialised steel products have been the focus of recent expansion for all major producers of steel in the world and Emirates Steel is now bucking the trend. Not many steelmakers in the Middle East region are present in the value-added segment yet and this is one reason why the UAE’s $3 billion-steelmaker is expanding its product manufacturing lines.

“We are committed to supplying innovative steel solutions that add real value to our customers’ operations,” asserted Al Romaithi. “The industry is moving from commodity-grade steel to high-grade steel, which provides higher margins,” he said. “To remain competitive domestically and in our export markets, we need to grow the share of value -added and sophisticated steel products in our export basket,” he added. The effort is to add to the steelmaker’s long product mix VAPs which allow better realisations.

The idea is to move from a commodity grade to high value product grade which is less volatile and less exposed to market impulses. “Let’s not forget that there are few players in this value-added products segment,” explained Al Romaithi.

Emirates Steel recently started developing steel for building offshore oil rigs, which was earlier being imported. “We are now developing new grades with higher mechanical properties to meet market demand in the oil and gas sector,” Al Romaithi said. The new structural steel that the steelmaker has started developing is the S355J2, which is intended for the supply of offshore oil and gas structures. 

Before that, Emirates Steel joined hands in a strategic collaboration with the UAE’s peaceful nuclear energy programme for power generation run by the Emirates Nuclear Energy Corporation for the supply of high-value steel products for nuclear plants.