'Saudi seeking to abolish customs duty' - SABIC

'Nothing enacted yet, but there is an intention to abolish the duty' - CEO
'Saudi seeking to abolish customs duty' - SABIC
By Souhail Karam
Sun 18 Apr 2010 08:27 PM

Saudi authorities are seeking to abolish a 5 percent customs duty on steel imports to counter a deficit in domestic supply, the head of the kingdom's biggest steel producer said on Sunday.

Mohamed al Mady, chief executive, Saudi Basic Industries Corp (SABIC), said: "There is an intention to abolish the duty but it has not been enacted yet. Such decision can not be taken without consultations with other Gulf Arab countries."

State controlled SABIC controls Hadeed, which covers about 62 percent of the kingdom's steel demand. SABIC is seen as the Saudi steel industry's bellwether because of its large production and its closeness to the government.

Saudi Arabia and five other Gulf Arab countries including the UAE and Kuwait have formed a customs union which imposes a common external tariff for products imported from outside their bloc, called the Gulf Cooperation Council (GCC).

A spokesman at the Saudi Commerce and Industry Ministry said on Monday that the kingdom had lifted the import duty on steel rebar to ease a shortage in the country.

The ministry denied the information on Tuesday in comments carried by Dubai based al Arabiya television channel.

After a relative lull, steel demand began soaring in the second half of 2009 fuelled mainly by massive state spending in the world's top oil exporter on infrastructure to diversify the economy and counter the effects of the global economic downturn.

Speaking at a post earnings press conference, Mady said Hadeed's plants were running at full steam but he suggested that other steel producers could have reduced their production.

He said: "There is a deficit in the Saudi steel market, (SABIC) plants are running at full capacity ... Hadeed produced 7 percent more than its production capacity (during the first quarter) ... Our (steel) market share rose to 62 from 55 percent."

SABIC opted not to raise steel prices in step with the global increase in iron ore prices earlier in the year, Mady said. SABIC raised prices twice this year: Earlier this week by 35 percent - or by a net $186.6 per tonne - and in March by $26.6 per tonne.

Hadeed's Chairman Abdulaziz al Humaid said iron ore prices were double their level a year earlier.

In 2009, Hadeed accounted for 10 percent of SABIC's total turnover and some 20 percent of its net profit.

Hadeed competes with Al Ittefaq Steel Products Co and Al Rajhi Steel. Saudi Arabia, one of the largest steel producers in the region, has the capacity to manufacture 8.4 million tonnes per year, according to industry association Arab Steel. (Reuters)

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