Protectionism had been looked at as a sort of threat to the freedom; today it has become a demand, or rather a necessity. Interference of the state with the economic affair had not been welcomed by businessmen, today such interference has become a necessity or rather a fundamental part of the attempts of looking for solutions for the current crisis which is afraid to turn from being a state of shrinkage passed through by the world economies into a state of a wide recession.
The demand for the interference of the state to support and safeguard industry is no longer just a demand exercised secretly in order to provide support to the recently growing industries. It has become a demand exercised aboveboard. Support had been considered a means resorted to to exercise pressure on the exports of the developing countries under the pretext that they are supported; today it has become a justification under the pretext of saving the big industries from collapsing.
The automotive industry in USA and also in a number of European countries, which is one of the biggest industries whose power has been shaken up as a result of the crisis, has resorted to demand government support. This demand has been resorted to by the American steel industry more than once during the years of the last century and it got it. Supporting the automotive industry was considered the sole option to face the state of disturbance it is passing through. Governments of a number of countries which used to see support as an aggression on the competition freedom and a behaviour contradicting with the principles of free economy, have found themselves forced to provided support and have rushed to take actions to safeguard industry under different titles as a solution which must be resorted to in order to limit the impacts of the economic and financial crisis and its extension over to all industries.
The automotive industry was not the only one industry which has suffered from the impacts of the financial and economic crisis which has hit most industries including the iron and steel industry. The world demand for the steel products has witnessed a strong fall during the second half of 2008, definitely in the fourth quarter. Also prices have fallen down to a great extent. The fall of prices has constituted a strong shock to the steel industry which has seen during the first half of this year an unprecedented rise resulting in a fundamental part thereof from the rise of the prices of the steel inputs and raw materials.
The more the rise of prices constituted a positive shock to the steel producers who achieved huge profits, the more the fall of prices constituted a negative shock. A number of steel producing companies have paid a great portion of their profits they have achieved when prices have reached the peak in order to cover the losses incurred by them as a result of the fall of prices, or rather to achieve a sort of balance in their situations. This state of affairs differs in this context from one producer to another, as well as from one market to another.
Hence it can be said with some reservation that the big companies were more capable to recover balance more quickly, especially that the big companies were less affected by the volatility of prices witnessed in some steel inputs, some of which, such as the steel billets, have reached USD 1200,- per tonne in June and then slipped down to USD 350,- per tonne in November, meaning that the fall amounted to about 70%, which resulted in tremendous losses for a number of companies.
The steel industry has been one of the industries affected by the global economic decline because of its connection with a number of the industrial activities which are the main drive of the economic and global growth. This effect has clearly been seen in the decline of demand, mainly in the construction market which was the main drive for the growth of this industry in a number of the world markets.
As the rise of prices has included all markets in the world during the first half of this year, so also has the fall of prices included all markets, irrespective of some negligible differences between one market an another and of some difference in how much was the steel industry affected by the global economic crisis, even though this difference was in the degree and extent of the capability of every industry to cope with the negative consequences resulting from this crisis.
Where is the location of the Arab steel industry in this crisis? What has it to do to alleviate its negative consequences?
Effects of this crisis on the Arab economies cannot be ignored, because the decline of the oil prices from about USD 147,- per barrel down to less than USD 40,- per barrel within several months has constituted a strong shock to the economies of the Arabian region, which has been reflected on a number of activities, at the top of which is the real estates sector which is the main drive for the growth acceleration of this industry.
The shock of the fall of the oil prices left negative consequences, on the current and expected growth rates. It has also weakened the financial capability which was directed to the new projects and expansions depending upon the presence of financial surpluses looking for secured investments. These projects have been adversely affected by this crisis, resulting in the delay of execution of many of them and cancellation of some of them. Also the financing and lending processes became more difficult.
What has increased the impact of this crisis on the Arab markets are the increasing imports which exceeded the volume of demand. Importing big quantities of steel during some months of 2008 resulted in stocks funded by banks, which forced the stockists to sell them at low prices in order to fulfill their obligations, which has created a state of disturbance and loss of confidence as well as speculations in the market, which has adversely affected the situation of the markets and increased the state of uncertainty in the markets.
It is not possible to ignore the fact that the Arab steel markets have been affected by this crisis. This effect has appeared more intensely in the flat products and the new projects of cold rolling coating and galvanizing connected with it.
This unveils one of the weakness points in the consuming industries in terms of their being unable to continue growth taking place in producing flats in a number of markets.
The question of the current crisis and its impact on the situation of the steel industry has taken an important part of the discussions of the board of directors of the Arab Iron and Steel Union held in Damascus during November 2008. Most points of views have converged on a fundamental point, the necessity of the return of confidence to the steel markets and taking actions to safeguard the competition in the domestic markets against the forms of unfair competition, because the future of this industry depends upon the power of its domestic markets, taking into consideration the importance of stimulating the exports which have declined during the past years as a result of taking actions which limited their freedom, with an expectation that competition will increase to carry out exports to the world markets, including our Arab markets which have opened their doors for imports, which put the local steel industry at the face of the risks of the return to the dumping issues constituting the greatest threat to the future of this industry.
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