A number of local steel and non-ferrous scrap dealers are on the verge of bankruptcy as a result of an export levy imposed on steel scrap by the UAE's Ministry of Finance and Industry, officials said.

The government came to the rescue of domestic iron and steel manufacturers by imposing a levy of Dh250 per tonne on the export of iron and steel scrap.

A Dubai Customs circular on September 11 said: "In accordance with the Federal Cabinet Decree No 262/4 of 2004, export and re-export of steel scrap shall not be permitted unless a no-objection certificate issued and stamped by the Ministry of Finance and Industry is submitted for each shipment, confirming payment of an export fee of Dh250 per tonne."

The notice came into effect on September 13. The decision was to discourage the export of iron scrap so that it is available for the iron and steel industry to make different products, which are in huge demand because of new construction projects that are announced almost daily.

"This new fee makes our export of scrap less competitive in price. The price of steel scrap in the international market varies between $170 to $200 (Dh625.26 to Dh735.60) per tonne depending on the season.

"The imposition of Dh250 makes our prices weak in the competitive market and we are losing business to our competitors," a Dubai-based scrap dealer said.

"Though the fee is levied on steel scrap only, customs officials are imposing this on non-ferrous scrap exports as well.

"We understand this step has been taken to protect certain local industries. However, this mechanism is counterproductive and will eliminate some important players from the market."

The decision to impose the levy as a deterrent has been taken following the suggestions by the local iron and steel industry, which was facing serious shortage of the raw material for a long time.

It has also been one of the factors in the recent escalation of prices of steel products.

In the UAE, seven iron and steel factories are engaged in the manufacture of various steel products, such as iron bars, which are consumed by local construction industry. Of these, three are in Jebel Ali, two in Sharjah and one in Musaffah in Abu Dhabi.

"The price of scrap is not very high in the international market," said Ahmad Safadi, administrative manager of Sharif Metals, one of the largest dealers of non-ferrous metal scrap in the Gulf.

"This new fee is very counterproductive and we are fast losing business in the export market. Our prices cannot beat those of our competitors.

"Besides, the levy is imposed on steel scrap, not non-ferrous scrap. However, we have often been charged for the non-ferrous scrap as well."