RIYADH: Al-Rajhi Steel Industries, one of Saudi Arabia’s three largest steel producers, said it plans to spend up to SR4 billion ($1.07 billion) to more than double its production capacity by as early as 2012.
The company, which accounts for about a fifth of steel and by-products sales in the Kingdom, plans to start a 1 million ton reinforced steel plant in Jeddah by early 2011, CEO Mehdi ibn Nasser Al-Qahtani told Reuters yesterday.
It also hopes to start production from a planned 1.8-million direct reduced iron plant which will most likely be located in the gas-rich Eastern province toward the end of 2012 at the earliest, he added.
The two projects will cost between SR3.6 billion ($484.4 million) and SR4 billion and increase the company’s overall production of steel products to 4.6 million tons to cater for an expected rise in domestic demand in the coming years. “We are working on financing ... Our group is linked to Al-Rajhi Bank so there will be equity injection from owners and loan contribution from (state-run) Saudi Industrial Development Fund as well as from other banks,” he said. The firm plans to cut prices of its products by between 6 and 10 percent, starting this week, Al-Qahtani said.
The planned price cut follows a decline in the prices of scrap metal, the main input the company uses to make steel products, Al-Qahtani said in a telephone interview. “The government’s decision to ban scrap metal exports has led to a 10 percent drop in the price of this input ... We want to reflect this decrease on the final consumer,” he said.
Prices of steel have almost doubled over the past two years as demand has outpaced supply in Saudi Arabia, where the government and the private sector are spending hundreds of billions of riyals on infrastructure and housing projects.
The rise in steel prices, exacerbated by increases in other input costs, has raised fears on the viability of some projects.
A Riyadh Chamber of Commerce and Industry official said in November that some 80 percent of small and medium-sized construction projects have been put on hold because of the surge in building materials and labor costs.
But the plethora of projects that are either led by or sponsored by the government are offsetting any impact on steel demand in the world’s largest oil exporter, Al-Qahtani said.
“We did not see an impact on steel demand, to the contrary, figures from 2008 show an increase over 2007 as government and development projects keep the pace of growth going up,” he said.
