In the Middle East and North Africa (Mena), the development of non-oil industrial sectors is a key strategy for creating jobs for the region’s youthful populations. But it appears investment in steel, aluminium, cement, mining and manufacturing has slowed over the past two years and is unlikely to pick up in 2015 and 2016.

Spending on non-oil industrial projects in the Mena region increased in 2014 compared with the previous year as major projects entered execution in the UAE, but awards in the sector still lag behind 2011 and 2012 levels.

Project awards

Industrial companies in the region are estimated to have awarded more than $5bn-worth of projects between January and mid-November 2014, compared with $4.2bn in 2013, according to regional projects tracker MEED Projects.

By far the largest non-oil industrial contract in 2014 was the engineering, procurement, construction and management deal awarded to a consortium of UAE-based Petrofac Emirates and US group Bechtel for a new alumina refinery in Abu Dhabi.

The contract, awarded by Emirates Global Aluminium (EGA), was revealed by MEED in October, but the value has not been disclosed. The CEO of EGA, Abdullah Kalban, was recently quoted estimating the value at $3bn – a figure that would make the deal larger than all the region’s other industrial awards combined in 2014.

The Petrofac Emirates and Bechtel consortium, which also carried out the project’s feasibility study, is expected to complete the construction phase of the facility by the end of 2017.

An EGA spokesperson said “early works on the project will soon begin on a site adjacent to Emirates Aluminium (Emal)”, a subsidiary operating a smelter at Khalifa Industrial Zone Abu Dhabi (Kizad), which is located between Abu Dhabi and Dubai.

In September 2013, EGA awarded two contracts to secure technologies to support the project. A joint venture of Canada’s Hatch Associates and Finnish minerals processing group Outotec was awarded one deal, while Canadian aluminium firm Rio Tinto Alcan was selected for its refinery technology.

The proposed refinery will process imported bauxite to extract alumina (aluminium oxide), which is used to produce primary aluminium in a smelter.

A metals park has been planned by Abu Dhabi at Kizad for several years. The Emal smelter has undergone a phase 2 expansion to increase capacity from 750,000 tonnes a year (t/y) to 1.3 million t/y.

EGA is a recent merger between Emal and Dubai Aluminium (Dubal). The combined company is jointly owned by Abu Dhabi state-owned Mubadala Development Company and Investment Corporation of Dubai.

EGA produces 2.4 million t/y of aluminium products, accounting for almost half of the GCC’s annual aluminium production.

Although the GCC region has significant aluminium smelting capacity, investment has been sparse since Saudi Arabian Mining Company (Maaden) awarded the main contracts on its Ras al-Khair complex in 2012.

Alba deal

The next major aluminium project award is expected to be on the phase 6 expansion of Aluminium Bahrain’s (Alba) smelter – the first capacity increase since the fifth potline was completed in 2005.

Alba secured a gas allocation this summer and appointed France’s BNP Paribas as the financial advisor for the project; Bechtel was hired as the consultant. Alba has been planning a sixth potline for several years, but has been hindered by a lack of gas. The new potline, as well as an efficiency and debottlenecking programme at the Middle East’s oldest smelter, will add more than 400,000 t/y of capacity to its current output of 870,000 t/y.

Gas supply issues have also delayed a planned expansion of Sohar Aluminium’s smelter in Oman. Despite being mooted in 2010, the scheme is thought to still be at an early stage, with an engineering, procurement and construction (EPC) award unlikely in 2015.

There is a total of $41.6bn-worth of industrial projects in the Mena region, either under execution or in the pre-construction stage. Out of this number, 48 per cent, or almost $20bn, are under execution. This leaves about $22bn-worth of projects in the study, design, front-end engineering and design (feed) and main contract bid phases, with only $6bn in the later, most advanced phases.

Despite fast-growing demand locally, the steel projects sector has been slow in recent years, and characterised by many schemes being delayed, put on hold or cancelled.

The World Steel Association (Worldsteel) recently estimated that consumption in the Mena region would grow rapidly in 2015, increasing at more than three times the global average, despite the unrest in some areas.

The industry body forecast that steel use in Mena will increase by 6.6 per cent to 72 million tonnes in 2015 after a rise of 3.3 per cent to 68 million tonnes this year.

“In the Mena region, steel demand in 2014 has been revised down due to the political instability in some countries in the region, but is still expected to grow… aided by strength in the oil-producing countries,” said World-
steel in its short-range outlook released in October.

The increase in steel demand is indicative of a recovery in the regional construction industry. In 2015, consumption in the Middle East is expected to rise by 6 per cent, the second-fastest-growing region in the world after Africa (with 8 per cent growth forecast).

Saudi Arabia, the Middle East’s second-largest steel producer after Iran, has struggled to push through major projects in recent years.

The kingdom’s previous flagship steel project, Al-Rajhi Steel’s proposed $3bn steel complex at King Abdullah Economic City (Kaec) was cancelled in 2013. In the same year, it emerged that chemicals group Saudi Basic Industries Corporation (Sabic) was planning to invest $4.2bn in two new steel projects, but these are now on hold as further feasibility studies are carried out.

One of the proposed plants is a plate mill at its iron and steel affiliate Hadeed’s existing complex in Jubail in the Eastern Province. The mill will have a capacity of 1.5 million t/y and will house a direct reduced iron facility with a capacity of 2 million t/y.

Greenfield mill

The second project is a cold mill to be constructed at Rabigh on Saudi Arabia’s Red Sea coast. The greenfield plant is aimed at providing raw materials for use in several downstream industries, including automotive and electrical.

Sabic initially stated that both plants would be in operation by 2018, but a question mark now hangs over this date. Adhering to the expected three-year construction period, contract awards would have to be made by the end of 2015 for this to be achieved, which is still feasible.

The largest steel project that could see an EPC contract awarded in 2015 is the Qatar-backed Bellara integrated steel complex in Algeria. The estimated $1.93bn scheme is a joint venture of Qatar Steel Company, Industries Qatar and the Algerian Ministry of Energy & Mining.

Spain’s Idom has been appointed to carry out pre-construction consultancy work on the project, and tenders could be floated in the first half of 2015.

Elsewhere in the industrial sector, two polysilicon plants are moving towards completion, while at least two more are in the pre-execution phases. The production of polysilicon – the raw material used to manufacture crystalline wafers for solar modules and thin-film cells in photovoltaic solar panels – is expected to be the backbone of a significant solar power industry in Saudi Arabia.

The Jubail polysilicon plant project, owned by Polysilicon Technology Company, is due to be completed in 2015, while Qatar Solar Technologies is set to complete its $1bn project in Ras Laffan in the same year.

Polysilicon pipeline

Idea Polysilicon Company tendered the EPC deal for its estimated $1bn-plus polysilicon and solar wafer plant in Yanbu on Saudi Arabia’s west coast in 2013, but has yet to announce a contract award after receiving bids from three consortiums. A fourth polysilicon project is planned by Cosmos Industrial Investment Corporation in Jubail, but is yet to be tendered.

Meanwhile, the region’s cement project pipeline appears to be drying up. Although there are more than $2bn-worth of cement schemes under execution in the Mena region, the value of projects at the pre-construction stage is estimated to be just $950m.

It seems unlikely that the Mena region will undertake new projects at the same rate as 2011 and 2012, when Saudi Arabia was awarding major contracts on its aluminium and phosphate fertiliser expansion.

Many industrial projects have been put on hold or cancelled in recent years, making it difficult to predict the amount of spending in 2015 and beyond, despite the relatively strong pipeline.