Asian Metal: Thank you for accepting this interview. Would you like to introduce yourself briefly?

Sohail: We have been operating in the U.A.E for almost eight years now, with interests in various aspects of the U.A.E business scenario. We are involved in construction and shipping, along with trading of downstream steel products, but in the last two years we have shifted our business model to focus on steel raw material. Much of the raw material trading is done in the iron ore market, including DRI, iron ore pellets/fines. We are working on entering the Indian and Pakistan coal market, where we have been involved with steel scrap and demolition vessel trading.

Asian Metal: Where do you source the commodities from?

Sohail: We buy DRI from Al-Tuwairqi in Saudi Arabia and the Persian Gulf and downstream steel products from Emirates Steel; selling primarily to India, Pakistan and Bangladesh consumers. We are starting exports of iron ore pellets from producers in Australia to consumers in China. In terms of scrap we are concluding 4,000-5,000t/m from U.A.E and are looking to expand our resource base using European and African suppliers. We are expanding into South East Asia, including Indonesia, Thailand, Vietnam and South Korea, so steel scrap supplier expansion is a key focus for us.

Asian Metal: In the last few years the DRI market has certainly expanded quickly in the India/Pakistan market. What do you see as the main driver for this?

Sohail: I think that a lot of steel producers have discovered the advantages of using DRI compared to scrap, especially gas based DRI. India does produce sponge iron, but this is coal based and this is a more expensive production route considering the price of gas today, and its forecast. The material that we export from Al-Tuwairqi is produced from gas based Midrex technology and is very competitive in terms of pricing and specification.

Asian Metal: I understand that Al-Tuwairqi intends on using their DRI production in Saudi Arabia for their steel production expansion and are setting up DRI production in Pakistan.

Sohail: Yes that is the case; Al-Tuwairqi has commissioned a 1.6 million ton/yr plant in Karachi, Pakistan, to meet with the country’s growing demand for steel. This is a joint venture with a Korean based company, POSCO, who buy 40-45% of the production. The balance is ear-marked for the Pakistan market, but also for Al-Tuwairqi’s new 1.3 million ton/yr steel plant in Saudi Arabia.

Asian Metal: How will this impact the Pakistan steel scrap market?

Sohail: This will have a significant effect on the Pakistani import market for steel scrap. As DRI based steel production ramps up in the region, I expect HMS imports to fall to a trickle. Ship-breaking is Pakistan’s main source of scrap, and will continue to supplement the new DRI-EAF plants in future.

Asian Metal: Moving on to recent market developments. Considering the strength of the downstream steel market in the Middle Eastern steel industry, why are Turkish steel producers struggling with their export market.

Sohail: Yes this is true; Turkish steel producers are no-longer the market leaders in the Middle East as domestic production is taking much of their market share. Emirates Steel, for example, has done wonders with the plant and is very competitive in the U.A.E and neighbouring countries.

Asian Metal: U.A.E currently has a relatively weaker steel demand comparing to its neighbours, Saudi Arabia, Kuwait, and Oman to some degree. When will the new Mohammed Bin Rashid City being proposed now have an impact on the market?

Sohail: The new city is very early stages of planning so will not have an impact on the market in the short term. Until people see some development work going on there, there will not be investment into infrastructure as the market risk is too high. For example, before the housing bubble burst in 2008, Dubai had installed nearly 66 million tons/yr capacity of cement factories; since then demand has dropped significantly and many have shut down or moved to places they see demand, like Africa and India. It is a classic example of people making too much investment, too early, and not really looking at the market from a business prospective.

Asian Metal: What is your view of the Pakistan coal market?

Sohail: The Pakistan market is a very mature market as far as coal is concerned; only South African RB1 and Indonesian coal is in demand. Total coal consumption is around 1.1-1.2 million tons/year. There are a couple of big traders that have a clutch on the coal business, so it is very difficult to penetrate. However, we have been pre-qualified to supply material into the country as there are a number of companies that want to get away from this carte business. We are in negotiations with some end users and Indonesian mine owners right now so expect to get the business moving shortly.

Asian Metal: How does this differ to the Indian coal market?

Sohail: India has a very diverse commodities market, and their coal market has vastly different dynamics comparing with Pakistan. They buy high and low grade material, depending on what type of end user you are talking to.

Asian Metal: Thanks for this discussion on the market. I would like to end with a brief outline of your current business strategy. What is the main area of focus at the moment?

Sohail: For 2013 we have setup our goals to target China, on the consumer side. We are already on our way as we have secured contracts for iron ore pellets and DRIC fines. We are visiting Vietnam and Thailand this year to source a suitable agent to work with. From our position as a strong regional exporter, we want to expand into other geographical markets; so that, by 2014, we will become a strong player in these markets as well.

Asian Metal: Is there much room for additional players in these markets?

Sohail: Yes I think so because there is limited competition with our strengths. For example, in Vietnam, there is Stemcor and Carvil who are a few of the players doing significant business right now. We can offer greater flexibility and can be more competitive on pricing because of lower overheads.

Asian Metal: With regards to supply, what is your main focus?

Sohail: We are currently expanding our supply base, in both steel raw materials and downstream secondary grade products.

Asian Metal: What exactly do you mean by secondary grade products?

Sohail: What I mean by secondary grade is, for example, if there is a Chinese steel producer with off-spec or over-rolling material like wire rods, HRC, billets and steel plates that they cannot sell to their regular consumers we can find suitable buyers in Pakistan/India/Africa.

Asian Metal: What your plans to expand steel raw materials?

Sohail: We are currently focussing on steel scrap suppliers, and are in negotiations to purchase from HMS and shredded steel scrap suppliers in Europe. We are looking for reliable suppliers of HMS, turnings, shredded, PNS, bundles etc; with preference to deal with smaller yards as we have more control on the situation. We are even financing steel scrap operations in Mauritania and Togo as well. For which we have very stringent due diligence procedures; we have a man on the ground to manage all of the activities.