Increase in Rebar Price in Saudi Merely 'Artificial', Contractors Say

RIYADH, 27 December 2007 -- Prices of rebar, a steel reinforcing rod used in concrete, has gone up in the Kingdom amid a booming construction industry, with distributors claiming that the rise was aggravated by a marked increase in demand in China and East Asia.

However, building contractors, real estate investors and consumers see it in a different way. They accused accredited distributors of price manipulation by artificially creating an scarcity of supply with the intention of raising the retail prices of rebar, the Arabic daily Al-Riyadh reported recently. The price of one-ton rebar is now SR250, the report added.

The contractors and investors cautioned that the increase in steel prices would not only damage the real estate sector and the collateral sectors, but also threatens government's plans to revive the real estate market and the plan of providing housing for every citizen.

They were calling for quick intervention of the Ministry of Trade and Industry to halt such abuses.

Moreover, the constractors said the situation would cause dispute between companies and owners of major projects or private housing because of the steel prices variation from the signing of the construction contracts and the present reality.

SABIC however ruled out in October plans to raise its steel prices. Mohammed Al-Jabr, vice president, SABIC Metals SBU, and Hadeed president, said in a statement that "sale prices did not change since last year in spite of rise of production costs due to increase of steel raw materials." He added that "SABIC is keen to stabilize prices as part of its national role in keeping price stability and providing best quality products."

Mohamed H. Al-Mady, SABIC vice chairman & CEO, said earlier that the company will raise its production of long and flat steel products from 5.3 million tons currently to 5.5 million tons in the beginning of 2008, through the Saudi Company for Iron and Steel Hadeed, owned by SABIC. Products contribute to a crescendo to meet the requirements of building and construction industries as well as a broad cross-section of manufacturing industries. SABIC products represents 53 percent of the consumption of the steel market in the Kingdom while the rest comes from other local and foreign sources," he added.

The Saudi government had reduced customs duty to 5 percent from 20 percent on its imports of steel to limit the rise in prices.

However, this has not led to an improvement in prices, the daily reported, as the local market depends heavily on national factories.