Saudi Arabia has lifted the import duty on steel rebar to ease a shortage in the Kingdom as prices rise for rebar feedstock, a Ministry of Trade and Industry spokesman said on Monday.

'There are no import duties not on rebar now because of a shortage in Saudi and we want to encourage traders to ship the steel here,' the spokesman said. 'This is a time when prices are high and traders don't want to pay duties on shipments.'

The kingdom wanted to prevent a shortage from delaying construction projects, the spokesman said.

Top oil exporter Saudi Arabia is spending billions of dollars on infrastructure as it looks to diversify the economy. State spending has provided a buffer against the global economic downturn.

The removal of import duty reverses a 5 per cent tariff the Saudi government imposed in January and comes after the price of steel billet in the Black Sea rose.

Steel billet producers in the Black Sea region are among the biggest suppliers of steel billet, which is used to manufacture the construction material rebar,  to the Gulf region.

Rising prices for billet have pushed rebar prices in the Gulf to around $800 per tonne from $550 earlier this year, traders said.

The government is also looking at ways to prevent traders stockpiling the metal, the spokesman said. It plans to inspect steel warehouses, he added.

'We don't want to have an artificial shortage of steel because traders are hoarding and trying to sell it later when prices are higher,' he said.

Last year, the ministry lifted an export ban on local producers when it deemed supply was sufficient to meet domestic demand. The spokesman declined to comment on whether the export ban would be reintroduced.

International steel prices began to rise when the world's top three iron ore miners - Brazil's Vale, BHP Billiton and Rio Tinto - which have the upper hand in the $80 billion iron ore business decided to push for a revamp of the decades-old annual benchmark system.

They want to replace the annual price contracts with quarterly ones and link prices to the iron ore spot market. The decision led Oman's Jazeera Steel to cut production.

Other regional producers have also considered cutting output. 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.-Reuters