Rak Steel, the second largest steel manufacturing facility in the UAE, has stopped production.

The decision was taken following increasing fluctuation in the cost of raw materials, involved in the production of steel, company's CEO Ajay Aggarwal said yesterday.

Speaking to Emirates 247 over telephone from India he said, the company's profitability had reduced significantly due to increasing and fluctuating cost of raw materials.

Rak Steel was inaugurated in 2008 with a capacity to produce 500,000 tons of rebar annually.

A further expansion plan was announced in 2009 increasing its production capacity to 750,000 tons.

Unlike others we import our raw material and the high and increasing cost fluctuation meant that it was no more profitable for us," said Aggarwal.

When asked when the factory would restart production he said, "We have been down for almost two months now. We have still not made any plans for restarting operations soon. It all depends on the market conditions," he added.

Price of scrap and billets have been fluctuating during the past few months.

According to Reuters, steel billet prices in the Black Sea and Turkish market gained ground as scrap prices climbed higher and merchants returned after depleting their stocks.

Quoting traders the report said that mills were offering Black Sea FOB billet at around $510 per ton to $520 per ton compared with $480 per ton to $495 per ton last week.

The price of scrap, a key ingredient in the making of billet, rose to $340-350 per ton from around $330 per ton.

Some major scrap purchases in Turkey recently has given the scrap dealers the upper hand in pricing.

While the demand for rebar continues to remain weak across the UAE and the region, production capacities have increased.

Emirates Steel on Monday announced that it increased its output by almost 45 per cent.

The Abu Dhabi-based company said production of rebar grew by 26 per cent during the first six months of 2010 compared to the same period last year.

According to UK based MEPS, production of crude should climb to near 21 mln tons in 2010, almost 20 per cent YoY.

It also said a further substantial increase is anticipated in 2011.

Source: Emirates Business