Non-oil industrial project markets in the Middle East and North Africa (Mena) were relatively quiet in 2012 after a spate of aluminium and steel spending in Saudi Arabia the year before.

An estimated $10.04bn will have been spent on projects in the metals, mining and manufacturing markets by the end of 2012, down 23 per cent from the $14.81bn invested in 2011. However, several new schemes in the pipeline could see the market peak in 2013 as large metals projects in Saudi Arabia, Algeria, Oman and the UAE get off the ground. According to regional projects tracker MEED Projects, $23.21bn is forecast to be awarded in engineering, procurement and construction (EPC) contracts over the next 12 months.

World Cup driver

The region is gearing up for an increase in steel demand driven in part by Qatar’s 2022 football World Cup plans, with consumption set to surge 6.7 per cent next year despite continuing political instability. Meanwhile, countries such as Saudi Arabia, UAE and Oman continue to pursue policies of aggressive industrial diversification to decrease reliance on oil revenues and provide jobs for young and growing populations. Saudi Arabia is ploughing significant investment into developing mining, metals and specialised industries, including renewable energy materials such as polysilicon.

The recovery of steel demand has been slower than expected due to continuing political instability

World Steel Association

The production of steel – the largest heavy industry outside the hydrocarbons sector – increased by a small margin in 2011, despite lower output in several countries, according to the World Steel Association (Worldsteel). In the first 10 months of 2012, Middle East and Africa steel production increased by 1.4 per cent, driven by the region’s largest producer, Iran. The Islamic Republic increased crude steel production 10.2 per cent to 12.05 million tonnes, giving the country two consecutive years of double-digit growth. Elsewhere, Egypt increased 10-month production by 2.2 per cent to 5.56 million tonnes, but Saudi output dropped 1.6 per cent to 4.32 million tonnes, while Algerian and Moroccan steel production fell 6.3 per cent and 10 per cent respectively.

Mena steel consumption, a good indicator of the health of the region’s construction market, is forecast to increase 4.9 per cent to 62.7 million tonnes in 2012, according Worldsteel. This represents a recovery from the 2 per cent slump reported in 2011.

“The recovery of steel demand in the Mena region has been slower than expected due to continuing political instability, but steel use in the region will still increase by 4.9 per cent in 2012,” said Worldsteel in its October outlook. “In 2013, the growth rate is expected to accelerate to 6.7 per cent and steel demand will reach 66.9 million tonnes.”

Steel demand

The forecast of strong steel demand growth in Mena for 2012 and 2013 should drive investment in new steel projects throughout the region. In terms of non-hydrocarbon industries, steel projects dominate the spending forecast for 2013.

The first major project to start construction in 2013 is likely to be Al-Rajhi Steel Industries’ steel plant at King Abdullah Economic City in Saudi Arabia. As of late November, four consortiums of technology providers and EPC contractors were vying for the main contract on the $4bn project, which includes a 1.8 million t/y direct iron reduction plant. Another major steel project in the pipeline for next year is the Qatar-backed Bellara integrated steel complex in Jijel, northeast Algeria. Qatar International has formed a joint venture with two local companies – state steel company Entreprise Nationale de Siderurgie (Groupe Sider) and government investment fund Fonds National de l’investissement – to build a 5 million-t/y steel plant.

The next 12 months will see the continued expansion of the region’s fledgling solar materials industry

The project will be carried out in two phases. The first phase, which will cost an estimated $2bn, will deliver 2 million t/y of long steel capacity by 2017. The second phase, which will cost an estimated $1.2bn, will add facilities to produce flat steel and special steel. Tenders for the phase one package could be released as early as the first quarter of 2013, making it one of the largest industrial contracts to be awarded in recent times.

UAE expansion

In the UAE, Emirates Steel is expected to commence construction on the phase three expansion of its steel complex in Mussafah, Abu Dhabi. Contractors submitted bids for the main contract on the budgeted $817m scheme, but the company is yet to award the deal. The scope of works for phase three will include the construction of a direct-reduced iron plant, steel melting plant, thin slab caster and a continuous strip rolling mill, with a capacity of 1.4 million t/y. The plant will produce hot-rolled coil and narrow plate.

The aluminium projects market in 2013 is set to be dominated by a single megaproject: the expansion of Sohar Aluminium’s smelter in northern Oman. The company plans to invest about $4bn to almost triple the plant’s capacity to 1 million t/y from the current 360,000 t/y.

The company expects to have awarded the EPC contracts for the expansion project by the end of 2013, but, as with many energy-intensive projects in Oman and the wider GCC, the scheme is still dependent on positive negotiations with the government on the allocation and pricing of gas. Discussions will not be helped by a dip in the global aluminium price, but Sohar Aluminium’s chief executive officer (CEO), Henk Pauw, believes longer-term global demand growth will create the market for further smelting capacity in the Middle East.

Aluminium prices have not fared well in 2012. After peaking at about $2,800 a tonne on the London Metal Exchange for cash deals in the second quarter of 2011, the price dropped to $1,992 a tonne in late November 2012. Earlier in the year, analysts speculated that the price weakened on speculation of a slowdown in the Chinese economy. China has an unprecedented influence on the global aluminium market as its rapid industrialisation has seen it emerge as the world’s largest producer and consumer of primary aluminium.

The other major Middle East aluminium project expected in 2013 is the new extrusions plant in Abu Dhabi. Taweelah Aluminium Extrusion Company (Talex), a joint venture of UAE-based groups General Holdings Company (Senaat) and Gulf Extrusions Company, is investing $200m to build a 50,000-t/y plant. A senior manager at Senaat, speaking in late November, said Talex was preparing to break ground “soon” and the company is targeting a second quarter 2014 start-up.

The next 12 months will also see the continued expansion of the region’s fledgling solar materials industry, largely located in Saudi Arabia. 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 provide the backbone of significant solar power developments in the kingdom. Polysilicon plants require a large amount of investment for their relative capacity, and generally cost in excess of $1bn to construct.

Polysilicon plans

A major polysilicon project expected to start next year is owned by Saudi-based Idea Polysilicon Company (IPC) at Yanbu on the Red Sea coast. The project looks to be moving ahead after IPC awarded France’s Technip the project management and engineering services contract in November. The plant will have a capacity of 10,000 t/y when completed, of which 4,000 t/y will be converted into solar wafers. It should create about 1,000 jobs. Awards for the procurement and construction phases of the project are due to be awarded in 2013.

Another polysilicon plant is being planned by Bahrain’s Cosmos Industrial Investment Corporation in partnership with Saudi group Project Management & Development Company (PMD). The project, to be located in Jubail Industrial City on Saudi Arabia’s Gulf coast, will have a total capacity of 7,500 t/y of high-quality silicon. The main contract award for the project, which is expected to cost upwards of $1bn, is expected to be awarded towards the end of 2013. However, a company active on the scheme told MEED in late 2012 that the design phase was moving at a slow pace.

While 2013 is forecast to be a bumper year for industrial projects, there are still a host of factors that can cause metals, mining and manufacturing schemes to be shelved or delayed.

Political instability, lack of funding and – in many cases in energy-intensive industries such as aluminium – the lack of low-cost gas allocations, can shelve many projects before they reach the construction phase.