ABU DHABI, (Reuters) – Al-Tuwairqi Group, which owns one of Saudi Arabia’s top three steel makers, said on Monday it expects the government to end before the end of July a ban on steel exports that has hurt profitability in the industry.
“Currently, negotiations for reviewing the ban are taking place on a very high level and hopefully it will be lifted in one to two months time,” al-Tuwairqi Group’s Chief Executive Tariq Barlas told Reuters on the sidelines of a conference.
The al-Tuwairqi family holds a stake of about 77 percent in Al-Ittefaq Steel Products Co, which was producing 2 million tonnes of steel in September, according to its Chief Financial Officer Shabir Rafiqi.
“Last year in April the government imposed a ban on scrap metals and finished steel products because prices increased from $650 to $1,300 (per tonne). The government wanted to protect local consumers because the price of manufacturing steel is very low in Saudi Arabia,” Barlas said at the conference.
The ban, which was enforced at peak prices, has hurt the margins of steel makers in the kingdom as its implementation was almost immediately followed by a rapid slide in global commodity prices on the back of the economic slowdown.
“Saudi Arabia will soon shift from being an importing country of metals to an exporting one. That is why the government wants to lift the ban,” he said.
London-based Middle East Economic Digest reported this month that al-Ittefaq was in talks with 26 banks for the restructuring of more than $1 billion in loans as a result of a rapid fall in steel prices, the slowdown in the construction market and the ban on exports.
Industry operator Ahmad al-Rajhi told al-Riyadh’s Sunday edition that difficulties experienced by some Saudi steel firms had more to do with the build-up of large inventories before input prices started falling.
Ittefaq Steel had a turnover of 2.9 billion riyals ($773.3 million) in 2007 and its net margin stood at about 8-9 percent and had planned a stock market listing for late last year to help fund expansion projects worth some $2 billion.
Ittefaq competes with Hadeed, a unit of Saudi Basic Industries Corp. (SABIC) and the kingdom’s largest steel producer, as well as with al-Rajhi Steel Industries. Saudi Arabia has a production capacity of about 8.4 million tonnes.