"We got our delivery after more than 15 days," said the manager of a major contracting company working on a government project. "Though the price we paid is still high, we are happy that we will be able to continue our project."

Currently, steel prices are averaging around SR3,000 a ton, which is around 30 percent more than the prince in March. But the availability is a bigger issue than price. If the required size is available contractors buy it without waiting for the prices to come down because if the completion of a project is delayed the contractor is required to pay a heavy penalty as per the terms of the contract. Besides, the cost of running the site and keeping the manpower and equipment idle are other costly disadvantages.

"Therefore, it's better to lose some amount on steel (purchases) than waiting and incurring penalty and losing money on other accounts," he said.

Mansoor Jafri, managing director of Mansoor Hussain Jafri Establishment for Construction, said too may government projects have been launched in a short period of time, thus putting pressure on local suppliers.

According to him, one reason of short supply was Saudi mill owners' inability to meet demand.

"It seems they have failed to cash in on the opportunity that the Saudi government provided them last year by banning the export of scrap. They did not increase their production to the required level," he said.

Jafri noted that local importers are in competition with mill owners. "They (the importers) do not want to stock steel fearing a price crash if mill owners increase their production," he said.

Mohamed H. Zakaria, CEO and general manager of Saudi Steel Profile Co., a leading steel manufacturer in Jeddah, has his own explanation to the current situation. According to him, the projects that are currently under construction in Saudi Arabia were bid during late 2008 and 2009 when steel prices had bottomed at SR2,000 a ton. Now they are selling at more SR3,000 a ton - making a big dent on the profits of the contractors.

"Contractors and related industry elements regularly blame steel manufacturers and traders thinking they are making a fortune out of steel business, whereas steel industry and trade is one of the most difficult business to run due to its extreme cyclical nature, as the famous saying goes for steel that 'running a steel company is a reliable way to lose money'," he said.