The UAE economy made a strong start to 2022, with crude oil production up 12% year on year through the first quarter. The data point to a solid expansion in non-oil sectors too, with strong growth in business and new work opportunities in the UAE. Overall, the outlook for the UAE remains positive.
However, the conflict in Ukraine and sanctions on Russia are impacting recovery prospects for the Middle East. Despite the better-than-expected momentum in 2021, the economic environment this year has been characterized by remarkable headwinds and uncertainties, particularly for commodity importers, with higher and more volatile commodity prices, mounting inflationary pressures and faster-than-expected monetary policy normalization in advanced economies.
Given that Russia and Ukraine are net exporters of steel (cumulatively to the tune of almost 40 million tonnes), there have been impacts on international steel availability and also on commodity and raw material prices which will see a steady increase and in turn affect the input cost of steel production. The situation has also been reflected in higher oil and gas prices.
Stainless steel and other steel products benefitted as the global markets recovered from the pandemic, with producers having posted their best earnings in recent history last year.
The outfall from the Ukraine conflict is also limiting supply of nickel - a key ingredient of stainless steel. Norilsk in Russia is the world’s second-largest exporter of Class 1 nickel and covers around 50% of LME stocks; in March 2022, the LME was holding 80,000 tonnes of Class 1 nickel whereas the normal figure is around 200,000 tonnes.
Nickel is set to play a pivotal role in energy transition owing to the growing market for nickel-cobalt-aluminium batteries used in electric vehicles, which account for around 10% of all nickel demand.
As far as the Middle East is concerned, there has been huge demand for stainless and nickel alloy scrap from the Far East. The Middle East has made the best of this situation to supply healthy volumes of scrap.