Higher duty to hardly impact S. Arabia’s billet imports, to affect flats

Monday, 01 June 2020 14:08:57 (GMT+3)   |   Istanbul

Saudi Arabia has decided to implement an increase in customs duty for a wide range of products, including steel, aiming at protection of local industry and increasing the country’s revenues as the general economic environment remains challenging. According to sources, effective from June the import rates will be increased from 5 to 10 percent for square billet, from 5 to 10-15 percent for hot rolled coil (HRC) and from 5 up to 15 percent for coated products. In the longs segment, the tariff for rebar and wire rod will be increased from 10 to 15 and 20 percent, respectively. “Oil prices are not strong. They increased VAT from 5 to 15 percent and now this tax on many imported materials, including steel,” a local producer told SteelOrbis.

The announced measure is not expected to affect billet imports to the country much as, according to sources, all three major buyers are exempt from paying the tax. “All [producers] have exemptions on their raw materials and semis from the government. The new move has no effect on all of us,” a local manufacturer said. In the meantime, in the finished steel segments the new duty rates will concern only the products coming from outside of the Gulf Cooperation Council (GCC) region and sales from Arab League members are still unaffected. As a result, the rebar business is unlikely to be disturbed much as the incoming volume from the other destinations is minimal. In terms of wire rod trade, sources foresee some decline in supplies from Asia, India and China specifically.

The largest effect is expected to be seen in the flats market as there is rather lively trade to Saudi Arabia’s Dammam area from Japan, India, South Korea and China. “These [batches] are usually combined with the volumes sold to the UAE, so now there will be more pressure from the consumers’ side,” a local trader told SteelOrbis. In terms of imports to Jeddah, Egypt, which can supply without restrictions, is to gain some additional support.

As a result, in terms of the local industry, the duties may support the positions of local wire rod and flat steel suppliers in Saudi Arabia and are not foreseen to have an effect on billet imports. In the rebar segment, the trade from outside the GCC will remain minor as previously, now secured by the additional tax.

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