Saudi cancels steel export duties, halves cement tariffs

Saudi Arabia said on Thursday it would cancel all export duties on steel for two years and slash cement export tariffs by 50 percent to encourage local industries and producers, and enhance competition.

Export licenses will be granted to producers when the local market needs are fulfilled, the Saudi Ministry of Commerce and Investment said in a statement.

In addition, a biannual report will be generated to evaluate the impact of the new measures, it said.

Steel and cement producers in the Kingdom have long complained about the higher tariffs on export. Last year, cement producers were forced to compete for market share amid inventory build-up by offering discounts. Profit margins for most companies narrowed as high transportation costs also weighed on their finances.

"The move by the Saudi government is a relief for the cement sector as the 50 percent cut in export tariffs brings down the landed cost closer to SAR 200 per ton and makes KSA cement competitive in the export market,” said Anoop Fernandes, senior analyst at Bahrain-based SICO.  

However, in the absence of sustained cuts in clinker production, the resulting small increases in export are unlikely to make any substantial dent in the supply overhang in the Saudi market, which is currently at seven months of stock, he added.  

Cement export tariffs had been earlier levied at between SAR 85 and SAR 133 per ton, while steel export tariffs were estimated between SAR 58 and SAR 390 per ton, Argaam reported.

Najran Cement, Al Jouf Cement, Tabuk Cement and Hail Cement have already acquired export licenses earlier this year. "In terms of companies, the move should immediately benefit those who already have export licenses. Also Saudi and Eastern Province Cement could resume exports to Bahrain," Fernandes added. 

Cement stocks surged on the Saudi stock market on Thursday on the news. Najran Cement jumped 6 percent to SAR 10.54 while Jouf added 5 percent to SAR 8.33.

Write to Brinda Darasha at brinda.d@argaamplus.com