Rising steel prices give rise to black market in Saudi Arabia

Riyadh : The huge rise in prices of steel has led to black marketeering of this basic construction material in Saudi Arabia.

Some of the steel products are being sold on the black market at prices higher than 400-500 Saudi riyals (Dh390-Dh488) or prices fixed by the Ministry of Commerce and Industry, according to market sources.

Hussain Mansour, official in charge of sales at Al Mutawally Steel Products Company, said that the prices of scrap iron products (12, 14, 16mm sizes) rose to 2,200 from 1,800 riyals.

Shortage

"There are also strong indications that the prices will increase to 2,500 riyals unless the authorities intervene," he said adding that the shortage of scrap metal spurred a huge hike in prices.

Last year, the Saudi authorities lifted restrictions on exports of steel and scrap metal, imposed in 2008, due to the tight supply in the domestic market.

Huge demand due to the construction boom in the kingdom coupled with a price increase on the global market and the shortage of supply are the major factors that resulted in the current soaring prices for steel products.

Minister of Commerce and Industry Abdullah Zainal Ali Riza warned those responsible for the current crisis in the steel market due to the soaring prices.

He said that those found guilty would face stringent punitive measures.

The ministry has sent squads to conduct raids on the steel market in various parts of the kingdom and to take punitive measures against the violators of regulations.

According to sources, prices of steel may increase another 50 per cent in the short term.

"Steel companies in the kingdom are eager to improve their financial position at the expense of consumers and small contractors.

"They also want to secure huge profits to compensate the heavy losses they have had to incur in the past due to the financial crisis and the export ban," they said.

Naif Al Baqami, an economic expert, noted that the total productive capacity of Saudi steel factories would reach only 3.75 million tonnes — insufficient to meet the annual demand of about 4.75 million tonnes.