The effect of Chinese steel export growth on the Middle Eastern market dominated discussion at the first Kallanish steel networking night in Dubai this week. Some participants lamented China’s advantage of having its steelmaking subsidised, while others argued competition was good for end-users.

Kallanish editor Adam Smith gave an overview of the market, pointing out that Gulf Cooperation Council government infrastructure spending could be impacted if there is a sustained period of weak oil prices. The resurgence of the construction sector in United Arab Emirates is threatened by liquidity issues meanwhile, owing to tight margins and payment delays by developers to building firms.

The slump in iron ore prices, coupled with the slowdown in global, but most importantly Chinese, economic growth has led to Chinese steel prices falling around 18% since January. As a consequence 66% more product (5.5 million tonnes) from the East Asian nation arrived in the Arab region year-on-year in January-August, Smith said. Arab steelmakers have long been calling for import tariffs, but there is no coordinated regional action.

“It’s all thanks to Chinese companies that we have some competitiveness of steel prices… that end users are still surviving,” said one participant. “There are incentives to export in China that are not strictly fair trade, so to say”, another attendee commented taking a contrary view.

“If you look at the cost of production, China imports everything, while other economies have everything available locally for captive consumption,” one trader commented. “In spite of that China is cheaper.” Another replied: “China imports everything, fine. Their cost of production is cheaper. In the Middle East it is compensated with other various parameters, such as energy. Why is the Middle East not able to compete with the global market?”

Iron ore prices appear likely to remain depressed in the near-term, as nearly 200mt of new iron ore production capacity is seen coming on line in 2014 and 2015. Competitive Chinese product therefore also appears to be here to stay for now. However, this competitiveness could be moderated if rebates to Chinese producers are reduced, participants concluded.