DAMMAM, 21 August 2003 — The recent construction boom in Saudi Arabia as well as reconstruction in Iraq has resulted in a dramatic increase in the demand of steel in the Kingdom, and as a result the market is experiencing a shortage. The effect of the shortage has been a steep increase in the price of various types of steel in the country.
But the Ministry of Commerce says it believes that one of the main reasons for the shortage is hoarding of steel by traders in order to create an artificial shortage and effect a price increase. The ministry is contemplating action against such hoarders.
In a statement the ministry said that it was taking several measures to meet the market requirements including asking businessmen reduce exports and start importing steel and iron of various grades.
The ministry admitted, however, that the recent construction boom was among the main reasons for the shortage. “In every construction, small or big, steel and iron is the prime requirement and hence demand outstrips supply,” the statement said.
According to market experts, brokers from Kuwait have been enquiring about steel for Iraqi reconstruction. Such queries naturally lead to an increase in demand and many traders tend to hoard the supplies for future sale at an inflated price, said a sales manager of a steel company in Dammam on condition of anonymity.
The industry experts say that demand of steel has risen to nearly 9 percent over last year, while prices have gone up by more than 15 percent.
The market sources say that the import of steel from various international sources has already started and an estimated 150,000 tons of steel is being imported. This is believed to satisfy the local market requirements and could bring down prices.
The traders, however, say that prices cannot be controlled unless the government abolishes the import tariff on steel. At present SR250 per ton is levied on imported steel. Traders say that once the duty is abolished the prices will automatically decline.
Meanwhile, the high demand of steel has led businessmen to plan a new steel factory in the Eastern Province and a factory belonging to the Al-Tuwairqi Group is almost ready for production.
