Steel prices continue to be higher but civil contractors are relieved that at least the required material is available in the market. Two weeks back contractors were complaining of scarcity with some fearing project delays, which for them is a costly affair especially for those working on government projects.
The manager of a major contracting company working on a government project said that “We got our delivery after more than 15 days. Though the price we paid is still high, we are happy that we will be able to continue our project. Currently, steel prices are averaging around SAR 3,000 per tonne which is around 30% more than the prince in March. But the availability is a bigger issue than price. If the required size is available contractors buy it without waiting for the prices to come down because if the completion of a project is delayed the contractor is required to pay a heavy penalty as per the terms of the contract. Besides, the cost of running the site and keeping the manpower and equipment idle are other costly disadvantages.”
He said that therefore, it''s better to lose some amount on steel purchases than waiting and incurring penalty and losing money on other accounts.
Mr Mansoor Jafri MD of Mansoor Hussain Jafri Establishment for Construction said too may government projects have been launched in a short period of time, thus putting pressure on local suppliers.
According to him, one reason of short supply was Saudi mill owners'' inability to meet demand. He said that it seems they have failed to cash in on the opportunity that the Saudi government provided them last year by banning the export of scrap. They did not increase their production to the required level.
Mr Jafri noted that local importers are in competition with mill owners. They do not want to stock steel fearing a price crash if mill owners increase their production.
Mr Mohamed H Zakaria CEO and GM of Saudi Steel Profile Company have his own explanation to the current situation. According to him, the projects that are currently under construction in Saudi Arabia were bid during late 2008 and 2009 when steel prices had bottomed at SAR 2,000 per tonne.
He added that contractors and related industry elements regularly blame steel manufacturers and traders thinking they are making a fortune out of steel business, whereas steel industry and trade is one of the most difficult business to run due to its extreme cyclical nature, as the famous saying goes for steel that ''running a steel company is a reliable way to lose money.