Steel Price Volatility: How Dubai Contractors Can Lock In Costs on Large Projects

A common scenario that a lot of us who have tendered for a construction project in the past few years in the UAE have gone through is that we price a job based on today’s steel rates, and by the time the contract is signed and the rebar order goes out, the numbers have moved up again. Sometimes, when it is a little, it doesn’t affect you much. However, at times, it would be enough to wipe out the margin on the whole project.

As you already know, steel is not a stable commodity. This has become even more noticeable in the last few years, with global raw material shortages, shifting freight prices, and rising international trade tariffs. When you pretend that it is a stable commodity, you end up suffering losses on fixed-price contracts, just as in the scenario mentioned above. However, there is good news. The thing is, price swings do not have to be something that you simply absorb.

Steel costs become easier to manage when pricing is agreed before the first slab is poured. Careful planning and the right supplier relationship make that possible, and an established steel company in Dubai, such as BM Steel, is a practical partner for it. Knowing why steel prices move is the first step, and the ways to manage those movements follow.

Why steel prices in the UAE keep fluctuating

Steel pricing in the UAE, or anywhere in the world, is not random. They always have solid reasons behind them, and once you understand them, these changes will make a lot more sense than they do now.  

• Raw material costs: The UAE does not produce raw materials for steel. That is why we rely heavily on imported iron ore, scrap, and billets. This means that international commodity prices feed directly into local rebar rates. So, when global scrap or ore prices rise, local rebar rates also follow within a few weeks.
• Producer concentration: Emsteel is the dominant producer, controlling around 60 per cent of the UAE’s rebar market. This means a single pricing decision from one producer can move the entire market, unlike what would happen with multiple strong producers. So, when Emsteel adjusts its monthly rebar price, most other mills and traders realign their offers to match it within days.
• Domestic demand cycles: construction activity in Dubai and Abu Dhabi is tied closely to project pipelines. When several large developments queue in, mills struggle to keep up with the orders. However, during Ramadan and the summer months, demand usually drops a bit. So, during this period, producers sometimes hold prices steady rather than cut them outright.
• Currency and freight costs: as stated before, the majority of the UAE’s steel input is imported. For this reason, the shipping costs, exchange rate movements, global freight bottlenecks, and so on, all show up in local pricing. What makes it worse is that it happens without warning, leaving little time to prepare for the worst.
• Regional geopolitics: Steel is one of the commodities most easily affected by regional geopolitical tensions. Such issues add uncertainty to the market, which in turn discourages buyers from committing to large positions and creates short-term price gaps between what mills offer and what traders are willing to pay.

Let us take an example here: UAE rebar prices moved from around 725 US dollars a tonne in February 2024 down to around 610 dollars by May of the same year. Then it climbed back into the 620 to 640 dollar range through the summer season. That’s a swing of around 20 per cent in just a few months.

What this volatility costs contractors

Although a five- or ten per cent swing in steel prices can seem manageable on paper, that is not the reality on actual projects. This difference, in practice, can easily be the difference between a profitable job and a painful one.

Projects where such swings make a huge difference include,

• Steel represents a large share of the total market cost. For example, high-rise towers, industrial sheds, and warehouses.
• The project timeline stretched over several months. This means that there will be multiple procurement rounds at different price points, contributing either to profit or a big loss.
• The contract is fixed-price with no escalation clause
• Cash flow is tight enough that a sudden price jump forces difficult sourcing decisions halfway through the project.

What usually happens in these situations where contractors get caught is that they either quietly substitute materials and cut corners on specifications, or absorb the hit and shrink their margin. Either way, the outcome is undesirable, and better planning can avoid both.

How to lock in steel prices before they move again

• Negotiate fixed-price supply agreements

The simplest way to approach this issue is to lock in a fixed price for the full tonnage you need, agreed upfront and honoured regardless of what the market does afterwards. But not everyone can offer this. An established steel company in Dubai, such as BM Steel, with strong mill connections, can offer this because they buy in volume and can absorb some short-term fluctuations on their end.

• Buy ahead of peak demand periods

As mentioned before, steel prices in Dubai tend to drop during Ramadan and the summer months. However, it picks up again right after this period. So, if your project schedule allows it, place large orders during these quieter windows to lock in better rates before the market tightens again.

• Use staged delivery with locked pricing

If you are going to need steel to be delivered more than once, this is your best option. All you need to do is agree on the total quantity and price at signing, rather than ordering everything at once or in intervals. Then, schedule deliveries in stages that match your construction sequence. This way, you get the price certainty of a bulk order without tying up capital or storage space for materials that you will not use for months,

• Build escalation clauses in client contracts

Although a fixed price is the best solution, that is not always practical. So, if your supplier can’t fix the price for the entire project duration, the next best option is to pass some of that risk upstream by including a price escalation clause in your client contract. This will be tied to a transparent benchmark like the monthly Emsteel ex-works rate. This is a standard practice on larger infrastructure projects that protects your margin without souring the client relationship.

• Get price commitments in writing, with clear validity periods

You cannot blindly trust verbal quotes because they usually mean nothing when the market turns. So, always make sure to get a written quotation with a clear validity period and confirm in writing exactly what happens if you place the order before that particular period expires.