"Normally we get delivery in just one day. But two days have passed since we placed an order and traders are expressing their inability to fulfill our demand, saying there is no steel in the market," said the civil works manager of a construction company in Jeddah.

The manager, who declined to be identified, said apparently the traders had begun hoarding steel products in the hope of further price rises.

According to him, average price of steel a month ago was around SR2,250. Now it has gone up to SR2,900. "We are forced to pay much more than our estimates when we launched our projects. We have provision for price escalation but not to this level. It's affecting our projects badly. There is also a time impact which will also be there leading to extra expenses," he added.

An executive of a steel trading company, who also spoke on condition of anonymity, refuted the hoarding charges, saying while structural steel was freely available, there was a genuine scarcity of reinforcement bars in the market.

Mohamed H. Zakaria, chief executive officer and general manager of Saudi Steel Profile Co., blamed three major steel producers in Saudi Arabia for the scarcity. He said the producers drastically cut their production capacity after the 2008 global crisis. That capacity has never been recovered even when the demand picked up. Because of their failure to secure raw materials for 2009, 2010 and beyond, the Saudi market is facing a shortage, forcing traders to look to international markets which are already soaring. According to Zakaria, up to 40 percent of the steel requirement in Saudi Arabia is fulfilled through imports.

He said international mining companies were also to be blamed for the shortage in Saudi Arabia and elsewhere. "The mining companies were manipulating iron ore which is the raw material for manufacturing steel," he maintained.

Meanwhile, construction companies were seeking government action to check the rising prices. In this connection lifting of customs duty on steel imports is keenly awaited.

According to Sami Shaaban, managing director of Shaaban Steel, the Supreme Economic Council has already approved the lifting of the five percent duty imposed earlier this year on steel imports to ease the recent price hikes that triggered panic buying.

He said the GCC Tariff Council, which is meeting in Riyadh this week, was likely to clear it. Without the council's clearance, Saudi Arabia cannot take a unilateral decision as all the six members of the Gulf Cooperation Council, of which the Kingdom is a member, are in agreement to take any such decision with consensus.

"Being the biggest market in the Gulf, Saudi Arabia has a greater say in the council. So, all indications are that the customs duty waiver will get the nod from other members," he said.

Shaaban said while the waiver would not have any impact on steel manufacturers in the Kingdom, it would be a respite for traders who are importing from foreign countries. "The main beneficiaries will be end-users such as construction companies, contractors and even individuals building their own houses," he added.