Saudi cuts steel exports to Gulf neighbours after surge in demand - Emirates24|7

Saudi cuts steel exports to Gulf neighbours after surge in demand

Exporters must now obtain an export certificate from Ministry of Trade and Industry. (XAVIER WILSON)

Saudi Arabia has decided to curb steel exports to its Gulf neighbours and other countries after a surge in demand created shortages and gave rise to market manipulations, the Kingdom's newspapers reported yesterday.

The move came less than a week after the world's dominant oil exporter decided to tighten its grip on cement exports following growing complaints by contractors that traders are stacking supplies for exports and more profits.

Saudi Arabia is the one of the largest cement and steel producers in the Middle East but like other Gulf oil producers, a construction boom has sharply boosted domestic demand and created shortages and market malpractices.

Saudi newspapers said the decision to curb steel exports, enforced yesterday, was prompted by what they called an upsurge in local demand for the metal and growth in black market activities which have sharply boosted prices.

"We have introduced new regulations to curb steel exports to neighbouring countries and other areas and we have actually started enforcing these regulations, which stipulate that exporters must obtain an export certificate from the Ministry before exporting products," said Saleh Khalil, supplies director at the Saudi Ministry of Trade and Industry.

"These curbs are within measures implemented by Saudi Arabia to ensure sufficient supplies of building materials for the local market, which is recording a sharp increase in demand. This has led to a steep jump in prices."

Last week, Saudi Arabia began enforcing a decision to curb cement exports to the UAE and other Gulf countries following reports that many construction projects have been suspended because of shortages in building materials.

Other Gulf states are tightening their control on the building materials industry to prevent manipulations that have led to a sharp rise in prices.

The rise in oil prices above $100 a barrel has pushed Saudi Arabia, the UAE, and other oil producers in the region into a second boom period involving high growth rates and one of the biggest construction drives in history.

According to the National Commercial Bank (NCB), the largest bank in Saudi Arabia, the Kingdom is on the verge of an "unparalleled" construction boom, with projects in excess of $460 billion (Dh1.68 trillion) in the pipeline.

So far, nearly 70 per cent of the 576 announced projects are progressing through advanced execution phases, the Bank said in a study sent to Emirates Business.

"These investments are inspired by the Kingdom's ambitious strategy to tackle the country's most chronic social and economic challenges; rising unemployment and the need to create more than five million new jobs by the year 2020, declining living standards and overall wealth of the population, and the unbalanced regional economic development," NCB said.

"These projects have been designed to leverage the Kingdom's competitive advantages; low cost energy producer and strategic geographical location. Given the strategic drive behind this capital investments programme, the construction is expected to remain in a state of boom in the near future."

In another study, the Kuwaiti Global Investment House banking group said the boom had largely benefited Saudi cement firms, allowing them to pump at maximum capacity and net their highest ever profits.

It has also prompted plans to construct two more cement plants to face demand and offset a widening shortage in supply.

"The current construction boom has caused the cement market to tighten. In early 2007 the government intervened to prevent excessive price increases. The aggregate profit of eight listed cement companies in Saudi Arabia soared by nearly 22 per cent to SR4.49bn (Dh4.29bn) in 2007 from SR3.68bn in 2006," the report said. Total sales volume rose by around 13 per cent to 30.33 million tonnes in 2007 from nearly 26.92 million tonnes tons in 2006.

The figures showed the real estate and construction sectors accounted for nearly 12.5 per cent of GDP by the end of 2006. But the share is expected to sharply widen because of ongoing government programmes to expand the non-oil sector.

"Real estate and construction sectors are within the forefront sectors to have a major role in the diversification plan. Thus, numerous projects are under planning or at development stage especially within the several economic and industrial cities," it said. "Many of these projects will be executed by a mix of domestic and foreign capital."