State-owned Emirates Steel Industries will resume production in three weeks after halting output in September due to oversupply in the market, the company's deputy chief executive said.

Emirates Steel, owned by the Abu Dhabi government, was set up five years ago with capacity of 600,000 tonnes a year.

It was taken over by Abu Dhabi Basic Industries Corp (Adbic) two years ago and aims to double production to 6 million tonnes by 2015.

'Everybody has cut production, all the major players who supply steel have,' Sridhar Krishnamoorthy said at a steel conference organised by London-based Meed.

'We have stopped production since three weeks and recognise there is an oversupply. We need to let the supply chain restore itself,' he said, adding that inventory in the UAE market was about 2 million tonnes in excess. 'Contractors are anxious about what is gong on in the world,' he said.

Krishnamoorthy said the group, which is in the process of increasing its capacity to 3 million tonnes, would double that figure through various steel projects at Taweelah in Abu Dhabi.

Adbic is also planning a dedicated Metals City for the industry, he said, declining to give further details.

The UAE capital has been diversifying its economy from the hydrocarbons sector, benefiting from a more than fourfold rise in oil prices since 2002 and has increased production in cement and steel to meet surging demand in the region's second largest Arab economy.

'Looking at the market growth, I see seven years of reasonable market share for all the players, but there is a reason for consolidation as we all have the same units,' he said.

Emirates Steel is in 'dialogue' with companies to see if there are opportunities for cross border alliances, Krishnamoorthy said, adding the company's primary focus was its existing projects.

Krishnamoorthy said the market was not fully isolated from the global financial crisis, but expected steel prices to stabilise towards the end of this year and into early next year before rebounding $40 to $50.-Reuters