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

Hussain: Tafaoul Trading & Contracting was setup in 1999 and has two key business components. We have the machinery and workforce in Kuwait to facilitate the logistical needs of construction companies, transporting the steel from the producers foundry to project site and facilitating in onsite logistics. We then purchase the scrap left over from the construction project, and deliver it to the steel producers. As well as supplying local mills in Kuwait with domestic steel scrap, we import steel raw materials such as HBI & DRI and steel scrap from global sources. When prices are better in the export market we supply Indian consumers with Kuwait steels scrap, and from global sources as well.

Asian Metal: I understand that the Kuwaiti government is banning the export of steel scrap. How is this impacting your company and the local market?

Hussain: Yes the government decided to ban exports in January, but has since been delayed for a further three months, so from April we will not be able to conclude any exports. The government has attempted this a few times before but cancelled because domestic demand was not sufficient. It is difficult to be sure what will happen this year, but the local market is strong now as there are a number of new smelters in operation and prices are better, so it should not have a significant impact on local prices. It does mean that we will not be able to take advantage of the Indian import market when it improves and we are searching for suitable suppliers in Europe and the USA to facilitate in this side of the business.

Asian Metal: What is your view on steel demand in the local market and the Middle East in general this year?

Hussain: Kuwait will have many new projects starting this year, much like Saudi Arabia. The government has announced it will spend KWD25 billion over the next few years (USD89 billion) in infrastructure projects. Some projects have already started, but activity will multiply quickly; new residential areas, commercial complexes, road construction and refineries are in the pipeline. In U.A.E the year is unlikely to see growth on the same scale as much of their development work has been completed, but the Middle East in general will have a strong year and steel prices will rise.

Asian Metal: This will certainly be good news to Turkish exporters, who have lost business because of the additional 5% tax on imports into U.A.E. Is there a similar tax in other Middle Eastern countries?

Hussain: This tax introduced by the U.A.E government is not replicated in any other country in the Middle East so is only impacting the U.A.E market. Kuwait still has to import steel rebar from Turkey because we do not have sufficient raw material to produce enough steel for the local market. The country has the capacity to produce 1.2 million ton/year but can only produce 600,00t/year right now due to the limited access to the raw materials. If there is a shortage of any of the key inputs, steel scrap, HBI, DRI or even lime, the smelters have to run at limited capacity. This is one of the market we are looking to fill.

Asian Metal: Is there sufficient demand already in Kuwait for this plant to ramp up to maximum capacity?

Hussain: Yes, there is a huge demand; Kuwait is importing steel from Saudi Arabia, Qatar, U.A.E and Turkey, primarily rebar for the construction industry. If we can source sufficient raw material for the smelters they will easily find enough buyers to ramp up to 1.2 million ton/year.

Asian Metal: What other countries do you supply steel scrap to?

Hussain: We supply India, Pakistan, Korea, and Thailand. We now only supply 2,500-3,000t/m for business outside of Kuwait; inside Kuwait we supply around 6,000t/m. We have considerable expansion plans for steel scrap and need to source suppliers of seamless pipes, HMS1&2 80:20 and LMS that can deliver on a CNF basis. We can arrange the logistic costs in the UK so don’t necessarily need CNF suppliers from there.

Asian Metal: Do you deal with any other products?

Hussain: Yes we have suppliers of mill scale and scrap billet in Kuwait and are looking for suitable buyers of these materials. The steel producers are vertically integrated so use their own steel billet to produce rebar and some billet produced is rejected by their rolling mill so is sold as scrap. The size is 3-6m and should be suitable for Indian smelters. Millscale scrap is primarily used by Chinese consumers.

Asian Metal: The Indian market was very weak for most of the year in 2012; do you expect a better year for Indian imports this year?

Hussain: India does play a very important role as far as the Middle Eastern scrap market is concerned, as does the European and US economy. India is one of the major consumers of Middle Eastern steel scrap because the gulf is their closest supplier and they prefer to pay a better price for material with a shorter transport time. The volatility in the Indian currency last year caused a lot of fluctuation in the steel scrap price in the region. This year it has started well, but I am not sure how the Indian currency will trend for the rest of 2013. Whatever happens, I am certain Middle Easter steel scrap will continue to be tied to any currency movements.

Asian Metal: Do you have concerns over how the continued government debt problems in Europe and the US will impact on the Middle Eastern market?

Hussain: Yes certainly all the economies in the world have an impact on the conditions on businesses in the Middle East. India may be only a 20% factor to consider. When the Leeman Brothers bank failed back in 2008 and there was a financial crunch in the US and Europe, the Middle Eastern market was still strong but steel scrap prices lost 80% almost overnight. We used to buy scrap by over USD500/t in Kuwait and had 2-3,000t of stock in our yard; the price fell to USD100/t and we had to take a loss like many companies. The international pressure can have a very large impact on prices so we have to be wary on international risk.

Asian Metal: I have seen the Spanish import price for steel scrap start to fall by EUR10/t in the last couple of weeks; do you think this is an indication of a decline in the Indian import market?

Hussain: Prices could fall a little in the next few weeks compared with today. Right now the currency is doing well, increasing 3.5% in the last three weeks, and is now below INR/USD54, so this is supporting today’s prices. If the Spanish import price decline is replicated across Europe and Turkey, the International price will certainly come down, and Indian imports will follow. A month ago there was no demand and prices were very low. Now demand has improved and prices are better, but it is still sensitive to fluctuations in consumer demand and I expect a slight decline will add downward pressure on prices.

Asian Metal: Do you think we could see the lows of USD360/t CIF Nheva Sheva that we experienced last year?

Hussain: No I don’t think so. It was a very difficult time when those prices were reached. The Indian steel producers were under considerable pressure due to weakness in their currency and weaker steel consumption in the country caused by monsoon rains delaying projects. A repeat is unlikely as the international market is stronger this year, but the risk is still there.