The steel industry in Saudi Arabia is influenced by the drop in oil prices

The steel industry is expected to be affected, as the sudden drop in the price of oil indicates a declining economy. Demand for steel and other construction materials in Saudi Arabia will take a hit.

Saudi Arabia is one of the leaders in steel consumption in the Gulf region with a demand dictated by the development of economic cities.

With one of the richest economies in the Middle East, one of the highest GDP per capita earnings. With a strongly growing population, industrialization, public transport system – railways, airports. It illustrates the governments’ orientation towards maintaining economic growth through intensive infrastructure development.

The steel industry affected by the fall of the global economy

Despite the firm maintenance of the construction market. The recent drop in the price of oil signals a decline in the global economy that may have a negative impact on the steel industry in Saudi Arabia. Until the summer, the price of crude oil was relatively stable in the last four years, around $110/barrel. The weaker demand for oil and the increase in US production forced Saudi Arabia to unexpectedly cut the price of oil. What was exported to the USA by 30% starting from June.

The low price of oil can harm US industry by affecting the interests of domestic producers. They will demand higher prices for profitability. Without Saudi Arabia raising prices, the US oil and gas industry is under increasing pressure. Aiming to maintain the high level of production, the highest in the last 30 years. Saudi Arabia needs an oil price of around $85 in the long term. But with a reserve estimated at $700 billion, it can afford to support lower prices for a long time. All this to eliminate high cost manufacturers.

Saudi Arabia is the largest growing construction market in the Gulf area. Representing 40% of all projects with development in 5 key areas of the economy: health, accommodation, education, transport and tourist entertainment.

The steel and construction industry will be affected by the drop in oil prices. As investors may be reluctant to invest in projects while the economy is faltering.

When the price of oil rises again, if the high-cost producers have been driven out of the market, Saudi Arabia will have a large market share of the industry and their economy will explode, fueling investment in the construction industry on a larger scale. .

Source: https://uk.finance.yahoo.com/news/steel-industry-set-impacted-slumping-000000104.html