Calculating the Fuel Price Difference while Exporting Steel & Cement

15 Dec 2016
Based on the High Royal Order, approving the export of steel and cement  under a license issued by the Ministry of Commerce and investment. The Ministerial Supply & Provision Committee, formed by the following ministries: Ministry of Commerce and Investment, Ministry of Finance, Ministry of Energy, Industry and Mineral Resources, Ministry of Environment, water and agriculture, has specified and approved the mechanism of calculating the price difference of fuel to be collected from the steel and cement factories, wishing to export their products.

It has been decided to calculate the difference between domestic and international prices of fuel, based on several criteria: the amount of export per ton for each factory, energy efficiency, quality of fuel used during manufacturing, the difference in the price of fuel between the government subsidized price and world price, which is to be calculated on a monthly basis or quarterly, based on the product used in manufacturing, which is the difference value of fuel borne by the government as subsidy for supporting the local factories. 

After the application of all essential inputs for the calculation of export duties for cement factories and steel, the results showed that the approximate export duties for cement ranging from (85-133) riyals per ton, while the approximate value of steel rang between (58-390) riyals per ton.

 It has been decided to calculate the price difference locally and globally at the  equivalent price of light Arabian oil prices, so that all factories are treated equally during the calculation of duties.

The concerned committee adopted the application of an electronic program to calculate the differences between the local subsidized fuel prices and global prices, and the Customs Department to be provided with this program, which is updated every three months, based on the world prices of fuel, or whenever the need arises.

The general controls for exporting steel and cement include that the exporter is a licensed plant, and the difference power prices to be collected on steel and cement based on the domestic and global prices and as determined by the Ministerial Supply & Provision Committee.

The manufacturers wishing to export steel and relevant products are obliged to export final products that meet the adequate amount of the local added value (40% of the final product value). Regarding the export of cement, the supply quantity of cement should meet the local market needs, also a strategic stockpile of (Clinker) to be available, at least 10% of its annual production. This is in accordance with the High Royal Order directions.

The Ministry of Commerce and Investment would like to announce to those interested to obtain steel or cement export licenses to contact the Consumer Protection Dept. at the Ministry bringing with them all necessary documents for getting the license.

It is worth mentioning that steel and cement manufacturing in the Kingdom consume large amount of power, and the government gives annual subsidy by providing the fuel in subsidized prices compared with the global prices. The annual estimated government support and subsidy for steel plants reach 2.1 billion, and the annual subsidy for cement plants reach 7.7 billion. The number of cement factories in the Kingdom is (17), while the steel factories are (7).

Last Modified 26 Dec 2018