Reduced prices of iron in the Saudi market are a source of worry for local iron mills. They are facing increased production costs while many importers buy processed iron or iron ore on foreign markets at comparatively lower prices. Local production of iron has been curtailed as a result of the low gains.

Since the beginning of the year, iron prices have been dropping globally. A ton of iron ore, the basic ingredient in iron processing, is now at $560 (SR2,100). The price of iron used in concrete is now $615 (SR2,300) per ton.

Abdullah Radwan, member of the National Contractor Commission and chief of the Contractors and Concrete Committee at the Jeddah Chamber of Commerce and Industry, told Arab News that the state allowed importing iron to keep prices down in the local market. “I do not think they will ban importing iron,” he said.

“The tough conditions faced now by local iron mills are a result of higher supply and lower demand. We expect that at the end of the Haj season things will start to pick up, especially for the expansion projects at the Grand Mosque in Makkah. There will also be other housing projects. We have reached a production landmark in the Kingdom of 5 million tons, while we import only 25 percent of our iron,” he said.

The new developments in the iron market come at a time when the government will be spending $400 billion (SR1,500 billion) on infrastructure projects. The Kingdom will need to increase its production capacity of iron and cement to meet the demands of urbanization. The country needs to build 1.65 million new housing units in the next two years to meet the increasing demand. Private real estate and government developers need to build 275,000 units every year.

The price of Turkish iron fell by 20 percent compared to Saudi iron. Prices of local iron have been increasing, and they are now at SR3,000 per ton, while the Saudi market is now witnessing a supply crunch in some construction products, like cement.

Khalaf Al-Otaibi, chief of the Construction Committee at the Jeddah chamber, said earlier that the price of Turkish iron now stands at SR2,700 per ton, while SABIC’s iron is sold for SR3,000. “Many contractors now prefer to buy Turkish iron simply because it is cheaper than Saudi iron. They believe that the prices of local iron are inflated,” he said.