Oman Adds 306,000 Tonne Steel Capacity as Gulf Scrap Markets Tighten

Regional steel importers face new margin pressure as Oman's Public Authority for Special Economic Zones and Free Zones signed investment agreements worth RO200 million ($520 million) for industrial projects targeting import substitution. The largest commitment is a RO41 million steel mould manufacturing plant by Alshaya Group in Duqm, with initial capacity of 306,000 tonnes annually. The plant will use Electric Arc Furnace (EAF) technology — a steelmaking process that melts steel scrap in an electric furnace rather than producing steel from iron ore — which Alshaya says has lower carbon intensity than conventional blast furnace methods. Steel moulds are precision-cast shapes used in construction and infrastructure, requiring specific metallurgical properties and close customer relationships.

‍

The timing leverages acute regional supply disruption. Steel scrap prices in Saudi Arabia reached 1,479 riyals per tonne on April 7 — the highest since pricing began in August 2025 — with one Gulf steelmaker source predicting "rebar supply will be tighter in May, and prices will go up further" with potential increases of another 200 riyals per tonne in April. The region's four operational EAF-based steelmakers normally use around 80-85% direct reduced iron (DRI) from imported iron ore pellets, but before the conflict several hundred thousand tonnes of pellets arrived monthly in Gulf ports. Consider a 50,000-tonne cargo of Swedish iron ore pellets, previously costing approximately $65/MT delivered to Saudi Arabia — the equivalent cargo now faces freight surcharges, insurance premiums, and alternative routing adding $25-35/MT to delivered cost.

‍

On the buy side: Regional construction companies and infrastructure contractors face steel cost inflation of 15-25% depending on product type. A mid-sized UAE contractor procuring 10,000 tonnes of rebar monthly now pays approximately $650-680/MT versus $580/MT in February, adding $700,000-1,000,000 to monthly material costs. Without forward contracts or hedging capability, these operators absorb margin compression or pass costs to project schedules. On the sell side: Existing Gulf steelmakers with inventory benefit from price appreciation, but face input cost pressures. Gulf steelmakers already operate at 30-50% lower CO₂ emissions than global averages — Emirates Steel operates at 0.67 tCO₂/t versus the global 1.37 tCO₂/t benchmark — providing competitive advantage in carbon-adjusted markets.

‍

For large integrated traders (Trafigura, Mercuria's metals arm, or Gulf-based trading houses): The Oman capacity addition creates arbitrage opportunities in steel scrap aggregation. At 306,000 tonnes annual capacity, the Duqm plant requires approximately 340,000 tonnes of scrap feedstock (accounting for yield loss). Current scrap availability in the UAE-Oman corridor trades at $480-510/MT, while alternative sources from India or Turkey face freight premiums of $40-60/MT. For smaller regional steel distributors and fabricators without derivatives access: Bilateral supply agreements with the new Duqm facility offer price stability versus spot market volatility. A regional fabricator securing 12-month contracts at fixed margins protects against the current 20-30% monthly price swings in regional steel markets.

‍

For observers: Monitor Fastmarkets' steel scrap HMS 1&2 index for Saudi Arabia — sustained levels above 1,500 riyals/tonne through June indicates structural supply tightness that supports higher finished steel pricing. Watch for Alshaya Group's construction timeline announcements by August 2026 — the company positions the EAF plant to "benefit from future green hydrogen developments," suggesting integration with Oman's broader industrial hydrogen strategy. Any delays beyond the projected 2028 commercial start extend regional import dependence and maintain current supply-demand imbalances.