DAMMAM: The second largest steel manufacturer in the Kingdom plans to lay off 1,800 workers as a result of a deepening glut in the Saudi steel market, Al-Watan daily reported yesterday.
“The Ittefaq Steel Products factory will be compelled to lay off 1,800 workers after 90 days if the company cannot export its products by that time,” said Khaled Al-Tuwairqi, vice president of Al-Tuwairqi Group.
The company has no option but to send 80 percent of its 2,145 workers on leave without salary for three months beginning on Jan. 1, 2009, Al-Tuwairqi said.
The move is in line with a decision of the company’s board of directors to cut costs over the next 90 days, he added.
Director of Legal Affairs at the Ministry of Labor Muhammad Al-Dowaish said the company’s move was within the limits of the labor law as the company would allow its workers to resume work when the financial situation improved.
Al-Tuwairqi justified the company’s stand citing the heavy losses steel companies have been suffering because of their inability to sell their accumulating stocks in the local market on the one hand and an existing ban on the export of steel.
The company does not find the funds to pay salaries to its workers or continue production, Al-Tuwairqi said.
He added that other companies are also facing the same situation and have been adopting announced or unannounced emergency measures to counter it.
He said the steel manufacturing industry in the Kingdom is currently passing through one of the worst stages in its history because of the recession.
Kingdom’s steel market first showed the signs of a downward spiral when 450,000 tons of steel was imported and the export of the local product was banned. More than two million tons of steel is lying idle in warehouses for want of buyers, he said.
His company’s board of directors has explained to the workers that their leave would become lay off if only the company’s financial condition did not improve over the next three months, he said.
Though the company called on related official agencies to interfere to deal with the glut in the market they have not so far taken any step, he said.
He also said that imported steel were of inferior quality. “We have clear evidence to show that the steel imported from Ukraine, Turkey and China does not meet the Saudi specifications,” he said.
Refuting a charge that the companies manufactured steel without considering the market situation, Al-Tuwairqi said, “The projected massive expansion works in private and government sectors at the beginning of the year indicated that the market would require eight million tons of steel.”
He further pointed out that if the market were not glutted, Saudi factories could have employed 3,000 more Saudis.
“But the later developments contradicted the expectations particularly when the factories had to buy raw material at very high price in addition to hiked shipping charges. The total effect of all these factors combined with the cheap import and global economic meltdown was huge loss to local manufacturers, he said.
