JEDDAH, 15 March 2006 — The Arabian Zinc Oxide Factory in Jubail Industrial City is the only one in the Gulf region, according to its manager, Nasser Al-Shehri. For the past year it has experienced problems buying raw material due to increasing prices and unfair practices by suppliers. Al-Shehri considers the price manipulations by local suppliers unpatriotic and harmful to local industries.
The factory, established in 1996 and owned by the Intermediate Chemicals Company — a subsidiary of Suwaidi Holdings Group of companies — produces around 4,000 tons of zinc monoxide annually. “It is the only such factory in the GCC countries and we cover most of the local market,” said Al-Shehri. It also exports to seventeen countries around the world. The factory produces zinc oxide, a white powder used in different kinds of products depending on the grade. A-grade zinc oxide is used in manufacturing pharmaceuticals and beauty products; B-grade in paints, ceramic and rubber among other things and the lowest grade is animal-feed grade. The Arabian Zinc Oxide Factory produces all three.
Al-Sheri said that production of zinc monoxide is facing obstacles related to the increasing prices of raw zinc globally. Getting raw zinc from the local market to produce zinc monoxide is also a problem because of competition. “There is no scarcity of zinc here but a scarcity of local galvanizers. There is great competition to buy the raw material, so the producing companies of the raw material raise the prices without relying on clear economic standards. The problem started several years ago but since last year it has become worse. It is more like a flea market now with the highest bidder getting what they want,” said Al-Shehri.
The factory buys all its raw material, which represents 90 percent of its production price, from local suppliers in Jeddah, Riyadh and Dammam. According to Al-Shehri, foreign buyers come in and buy the raw material for a higher price and export it.
The final product is manufactured tabroad and then brought back here and sold for four times the price it would have cost to manufacture it here. “This way the local industry suffers; we local industries should support each other to help the national economy,” he said. The problem is that suppliers do not commit to a contract of a fixed percentage, which makes it difficult to make long-term commitments to his customers, “even though it is possible to reach a reasonable price because the price of zinc is known from the London metal exchange and an average price can be determined from the previous month.” He suggests that perhaps the government should make regulations especially since it is expensive and time-consuming to settle disputes in the courts.