The GCC’s metals and mining sector has been identified as one of the main pillars of industrial diversification and this is reflected in the contract awards made in the last 12 months.
According to Middle East projects tracker MEED Projects, $5.7bn worth of projects were awarded between the first quarter of 2012 and the first two months of 2013.
The largest award is the last major contract at the $10.8bn aluminium complex that is being constructed at Ras al-Khair in the Eastern Province of Saudi Arabia. The $1bn contract was for a 1.8 million tonnes-a-year alumina refinery at the site and was picked up by South Korea’s Hyundai Engineering & Construction.
Aluminium production and its subsequent downstream conversion is proving to be a popular way of adding non-hydrocarbon heavy industry to a country’s portfolio in the GCC and when the smelter complex at Ras al-Khair is complete, it will only be Kuwait that does not have its own smelter.
In the steel sector, a number of major awards have been made. The GCC’s steel industry is more diverse than aluminium with a number of private investors also executing large-scale projects.
India’s Jindal is investing $600m in expanding the Shadeed Iron & Steel plant it operates in Oman and Italy’s Danieli are executing a contract that is set to be complete in 2015.
Despite concerns regarding gas feedstock, as well as other issues including financing, the forecast for future metals and mining projects remains robust.
MEED Projects states that there are over $28bn worth of projects in the sector that are at the study, design and main contract bid stages.
It is likely that several of the projects will fail to materialise for the aforementioned reasons, but the value of the planned schemes indicates that there will be many opportunities for international design consultancies and engineering, procurement and construction contractors in the next three years.
In the short-term, the market outlook for 2013 is going to hinge around a couple of key projects.
In Saudi Arabia, the $3bn Al-Rajhi Steel complex that is planned for the King Abdullah Economic City (KAEC) was due to make contract awards in late 2012. However, the bids that were received were deemed to be too high and now it is uncertain how the project is going to move forward. If a compromise can be reached regarding the scheme, then the largest steel complex ever attempted in one phase will be back on track.
Another major player in the steel industry with a large project at the main bid stage is Abu Dhabi’s Emirates Steel Industries (ESI).
ESI’s phase III expansion has been the subject of much speculation and an award was expected to be made in mid-2012. The project, which has an estimated budget of several hundred million dollars, has gone quiet, however, and now some industry sources believe that the scheme could be built in a different location to the company’s complex in Mussafah.
Whether either of these projects will enter an execution phase in 2013 is not yet clear, but if they do go ahead then 2013 could eclipse the previous 12 months and ensure that the GCC’s industrial diversification plans remain firmly on track.