China-US trade war hits UAE construction and retail supply chains
As the US-China trade war escalates, the impact is beginning to affect the UAE and GCC marketplace, with the supply chain the first source of concern for retailers and local manufacturers.
Chinese manufacturers and suppliers are looking to alternate markets to export their goods, and the UAE is a favoured destination.
These goods are flowing in at prices far lower than existing market levels and hurting trader/supplier margins, according to traders who spoke to Gulf News.
“In retail, the flood is mostly of consumer goods and apparel, and this is where prices are most affected,” said Sanjay Duggal of the Middle East and North Africa Franchise Association. “The dumping has not happened in the foodstuffs trade as yet.”
“In construction, every category except for cement is feeling the pressure from cheaper imports,” he added. The UAE has a fairly advanced cement manufacturing capacity, and is supported by sizeable cement production capacities in other GCC markets, which is enabling suppliers to meet China head-on in terms of economies of scale and pricing.
The same can be said of steel rebars, according to Bharat Bhatia, whose company Conares operates steel mills in the UAE.
“Thankfully, on steel rebars, the UAE is running on slightly over capacity in domestic manufacturing, but no such luck in flat steel,” said Bhatia. “There are supplies coming in from China at much lower levels than what the market has been used to.
“It’s not just local traders who get hit with stocks they brought in at a higher price … the entire market suffers if margins drop below sustenance levels because there are always cheaper Chinese made options.”
“When the Chinese start pushing goods into any market, there’s no stopping them. It’s never about prices for them, but about liquidating whatever they produce,” he adds.
For this reason, it’s next to impossible to compete against Chinese goods purely on price. And in the current market, the supply chain is exceptionally price-sensitive.
“Even in those categories that are not directly affected by Chinese dumping, there will be liquidity worries,” says Bahtia. “Banks are worried about the current situation where traders are offering extended credit cycles of 6-9 months, delaying receivables. All of this can easily dry up liquidity.”