Saudi restricts steel exports amid supply crunch

SUPPLY CRUNCH: Saudi Arabia has curbed steel exports in an effort to ensure there is enough domestic supply. (Getty Images)

Saudi Arabia has moved to limit steel exports to its Gulf neighbours and other countries, after a surge in demand created shortages in the kingdom, according to Saudi newspapers.

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, creating shortages and the potential for market malpractice.

Last week, the kingdom restricted the export of cement after it emerged that some traders were stockpiling supplies in order to drive up prices for contractors abroad.

“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,” he added. “This has led to a steep jump in prices.”

The rise in oil prices above $135 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.

Despite only accounting for 2 percent of the global steel trade, the Middle East steel industry is undergoing rapid expansion to meet the needs of the fast-expanding construction sector. The Middle East produced 21.1 million tonnes of raw steel in 2006 and consumed 41.6 million tonnes of finished goods.

This is forecast to rise to 35 million tonnes of production and 60 million tonnes of finished goods by 2010.

Steel rebar prices broke through the $1,000 a tonne barrier in late March 2008. They shot up from $600 a tonne to well above $800 a tonne in the three months to end-January 2008, reflecting the huge demand for long products from the booming construction industry.

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