Saudi Arabia's construction sector has been hit by rumours that steel prices will collapse shortly because of falling demand, but its industry chief insisted that prices showed only slight decline, according to a report.

The steel bar prices fell by around $26.6 per tonne in December, but steel foils dipped o $412 from $573, Shuail Al Ayed, chairman of Steel Committee in the Council of Saudi Chambers of Commerce and Industry, was quoted as saying, by the Zawya report.

"The big price decline happened only in steel foils. Prices for other steel products fell by only around SR100 ($263) per tonne for marketing reasons," he said.

They include an increase in stocks, the departure of illegal migrant workers, and seasonal year-end drop in demand as contractors await disbursal of payments from the government, said the report.

The demand for steel will rebound in the next few months following statements by the finance minister that fall in oil prices will not affect capital spending, Al Ayed added.