Saudi Iron and Steel Company (Hadeed) has lowered its rebar prices to the domestic market by SAR 200/tonne ($53/t) for the second time in three months. This is in order to discourage buyers from procuring Turkey-origin rebar, the prices of which have continued to fall since the steelmaking subsidiary of Sabic’s last price reduction on 1 September.

Saudi Arabian construction activity is reported to be slowing as state spending is cut back and payments to government contractors are delayed due to low oil prices. Some reports say companies working on infrastructure projects have been waiting for six months for payments as the government seeks to preserve cash. The finance ministry, meanwhile, is heard telling government bodies to return unspent money which they were allocated in this year's budget.

Investment bank EFG Hermes said last month it expects a slowdown in Saudi contract awards and slow receivable collection for construction firms in the country.

Although payment delays are occurring in the construction industry, “… it’s not as dramatic as the press is making out”, a Saudi trader tells Kallanish. “The situation is being compared with the last ten years, which were golden years – 30 years ago this was the norm. The concerns over liquidity are not such a great issue… Banks will always step in despite being sceptical of the construction industry.”

Projects awarded in the last 12-18 months are likely to continue, albeit at potentially a slower pace. The concern for steel suppliers is what happens come 2018 when the current round of projects is completed. If oil prices remain low, there could be far fewer new projects to absorb steel production than there are today.

Hadeed is heard offering 16mm diameter and above (base price) rebar at SAR 1,770/t ($472) delivered in Jubail, SAR 1,800/t del in Riyadh, SAR 1,845/t del in Jeddah and SAR 1,880/t del in Jizan. The steelmaker could not be contacted for comment.

Many of Saudi Arabia’s rebar producers have failed to clear the backlog of rebar inventories which initially accumulated when the construction sector slowed drastically in 2013 on the government’s illegal labour crackdown. “Consumption is still there but the worry is prices,” the trader says. “Imports at low prices are likely to force Hadeed to lower prices more frequently.