Saudi Arabian metals sector looking buoyant

19 September 2011

Increased gas allocations driving large capacity increases in aluminium and steel

There are over $20bn-worth of metals projects currently being planned or under execution in Saudi Arabia, according to regional projects tracker MEED Projects.

A relatively small metals industry in the kingdom has always been something of an anomaly, especially as the country has got an abundance of natural resources at its disposal.

This is being addressed now and a number of world-scale projects are under way that Riyadh hopes will significantly increase both aluminium and steel production to a level that can support its ambitious infrastructure plans.

Sales gas delivered by Saudi Aramco
Trillion square feet
Source: Saudi Aramco

“The most important aspect is to make your own steel and aluminium,” says a metal industry source. “In today’s metals markets, controlling as much of the supply chain as possible is vitally important and the kingdom has now realised this.”

The projects are being backed by Riyadh in the form of gas and land allocations. There is still a backlog of metals projects awaiting allocations, but that should abate as more gas comes on stream.

The fully integrated aluminium complex being built by the Saudi Arabian Mining Company (Maaden) and the US’ Alcoa at Ras al-Zour in the Eastern Province is now well under way, with significant progress now made on the 740,000 tonne-a-year (t/y) smelter. Completion for the plant is expected in the first half of 2013.

The 450,000 t/y rolling mill is being built by South Korea’s Samsung Engineering and is expected to be completed at around the same time. Tenders are being prepared for the 4 million t/y bauxite mine and the 1.8 t/y alumina refinery with completion expected for 2014.

In the steel industry, there are a number of projects aimed at reducing the kingdom’s deficit in both finished products such as pipes and reinforcing bars, as well as semi-finished products such as billets and ingots.

“[Saudi Arabia] imports around 1.5 million tonnes of billets every year,” says a steel industry source. “Importing rather than making billets has a serious impact on margins.”

The $630m Jubail Steel Billets Facility being built by the Saudi Arabian Fertiliser Company (Safco) and the Saudi Iron & Steel Company (Hadeed) is being built by Italy’s Danieli and is due for completion by the end of 2011.

The largest steel project being planned in the kingdom is the $3bn fully integrated steel plant at the King Abdullah Economic City (Kaec), which is finally coming to fruition after years of planning after receiving a large gas allocation.

While the petrochemicals sector dominates the kingdom’s plans for adding value to its hydrocarbons, a healthy metals sector will assume a vital role by supplying much of the raw materials required.

Cheap and abundant gas is the key driver behind metals projects and if the kingdom has it to allocate, there will always be companies wanting to use it.

Expect strong growth in both steel and aluminium production in the mid- to long-term.

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