Local steel manufacturers in Saudi Arabia have received licenses to export the metal after a ban was lifted this month, a Ministry of Trade and Industry spokesman said on Monday.

But a ban on exporting scrap metals remained in place because the ministry believed local demand was still unfulfilled, the spokesman said.

Saudi Arabia, the largest Arab economy, imposed a ban on steel exports last year to protect local consumers in the kingdom as domestic prices of the metal soared from $650 to $1,300 per tonne in July last year, traders said.

"The ministry has lifted the ban on steel because we want to support local companies and if the demands of the local market are met there is no harm in exporting the remaining amounts," the ministry spokesman said.

Khaled Suleiman, an undersecretary in the Ministry of Trade and Industry, said Saudi steel companies would target Iraq, Jordan, Syria and the Gulf.

"There's still demand there," he added.

Saudi Arabia, one of the largest steel producers in the region, has the capacity to manufacture 8.4 million tonnes per year, according to industry association Arab Steel.

As one of the conditions of lifting the ban, the ministry had stipulated that local exporters maintain "strategic reserve" levels of at least 10 per cent of a plant's total production in order to avoid domestic shortages, the spokesman said.

"The prices of the steel sold locally also has to be within reasonable levels and will be monitored by the ministry," he said, without giving further details.

The steel export ban, which was enforced at peak prices, has hurt local steel maker's margins because it was almost immediately followed by a rapid slide in global commodity prices due to the economic slowdown.

Global steel prices have tumbled more than 70 per cent in some regions since hitting a peak in mid-2008.

The downturn has knocked demand across the world, forcing steelmakers to sharply reduce production, shelve investment plans and lay off workers.

Saudi Arabia's steel demand this year is expected to fall to 5.1 million tonnes from 7.2 million in 2008, Hisham al-Hamili, the general manager of Steel Products Sales & Marketing at the Saudi Basic Industries Corporation (Sabic) said this year.

In the Gulf, steel imports were expected to fall 20 per cent this year as an oil-driven boom slows, industry participants have said, as billions of dollars of construction projects are put on hold or delayed. – Reuters