The Middle East is set to become a big player in the metals and mining industry in terms of production and investment opportunity, thanks to infrastructure development and the potential for growth for foreign companies, according to a report.
Deloitte in a report released on Monday titled ‘forging a new path: opportunities for Latin American metals and mining companies to consider in the Asia-Pacific region’ said that the emerging economies in the Middle East have been taking advantage of the income provided by oil to invest in the steel industry.
These huge investments by the region in metals and mining sector, the report added, not only as a means to supply the domestic infrastructure and construction demands, but also as a way to diversify national economies and make them less dependent on oil.
“As high oil prices continue to fuel economic growth and capital investment, large investments are being made to increase domestic steel production to meet growing demand especially in the production of long products such as reinforcing steel,” it added.
“The Middle East may even emerge as a net exporter of steel over the long term as production capacity continues to rise and Gulf Cooperation Council (GCC) countries become oversupplied. A number of Middle Eastern countries are investing in multi-million dollar state-financed projects, which are set to come on-stream over the next couple of years,” the report said.
“With prices of iron ore and coking coal also rising significantly, companies are actively searching for new sources of raw materials and merger and acquisition (M&A) activity is showing signs of recovery, with some Asian acquisitions taking place in the Middle East among other regions,” it added.
“Emerging economies, including the Middle East, are likely to be the most motivated to engage in new deals and are more likely to consider M&A activity as an avenue for growth,” said Mutasem Dajani, Energy and Resources partner at Deloitte in the Middle East.
“The long-term outlook for the region remains positive as infrastructure development, coupled with the potential for growth, offers attractive opportunities for globally-oriented mining and metals companies, suppliers and downstream partners,” he added.
“Steel companies in India benefit from ore self-sufficiency and high raw material prices. India is challenged by strong government regulations, making international participation difficult,” the report said while citing the potential of India and China outlook.
“China’s most significant challenge to keeping pace with demand is access to high-quality, easily extractable raw material. As a result, Chinese companies have been active in searching for ore in Africa and are partnering with companies in other countries to ensure their supply remains constant,” the report added.