Saudi steel ouput down 15% year-on-year in July

Monthly steel production in Saudi Arabia fell by 15% year-on-year in July 2012, with a decline also over the first seven months of the year, despite the country’s drive to be a leading producer among Middle Eastern states.

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Crude steel production for the month fell to 282,000 tonnes, from 332,000 tonnes in July last year, World Steel Assn (worldsteel) figures show.

Among Middle Eastern and African states, only Morocco’s output fell more over the period, down by 18% to 50,000 tonnes from 61,000 tonnes last year.

South Africa, which exports to the Gulf among other regions, saw its production fall by 6.9% to 580,000 tonnes, from 623,000 tonnes.

In contrast, production in Algeria rose by 8.3% against July last year to 65,000 tonnes, Egypt increased output by 3.1% to 590,000 tonnes, and Iran produced 4% more to reach 1.12 million tonnes.

Saudi Arabia has invested billions of riyals into its industrial sector in a bid to reduce the country’s reliance on imports, modernise its infrastructure and create jobs for citizens.

It is currently the largest consumer of steel among the Gulf Co-operation Council (GCC) nations.

A banking analyst in Bahrain told Metal Bulletin last week that, of the 73 billion riyals ($19.46 billion) in “fresh” loans from the seven biggest banks in Saudi Arabia since last year, 16 billion riyals went into the manufacturing sector, which includes steel projects.

Non-oil fixed investment represents 31% of gross domestic product, according to National Bank of Kuwait. Government spending, which grew by 23% last year, is expected to slow to 5% year-on-year from 2012.

Projects stalled
Although a number of steel-related expansion projects have come on line in the past few years, certain major projects – such as Al Rajhi Steel’s expansion into production of more specialist steel – have yet to materialise.

A 1 million-tpy meltshop for Saudi firm Sulb is scheduled for completion next month.

The decline in production over the first seven months of the year took Saudi Arabia’s output down by 2.1% to 2.99 million tonnes from 3.05 million tonnes.

The two other losers in July also made less over the seven months – Morocco’s output was down by 13.5% to 352,000 tonnes while South Africa’s declined by 17.6% to 3.98 million tonnes.

Algeria’s production rose by 35.5% to 416,000 tonnes, while Iran’s and Egypt’s outputs increased by 8.1% and 2.6%, respectively.

Regional anomaly
Traders say Saudi Arabia is an anomaly in the Middle East as local steel prices typically remain stable despite fluctuating international offer prices.

One pipemaker in the UAE who buys from Hadeed, the steel arm of Saudi industrial giant Sabic, said that hot rolled coil is frequently the most expensive product internationally, even when the company has hundreds of tonnes of stock unsold.