Yearbook 2011: Industry outlook - Project activity focuses on metals sector

09 December 2010

More than $50bn-worth of metals projects to be tendered in 2011


$50bn: Value of metal projects expected to be tendered in the Middle East and North Africa region in 2011

$10.8bn: Cost of Saudi Arabia’s Ras al-Zour aluminium complex

$1.2bn: Cost of Bahrain’s Hidd Steel Mill – a joint venture between United Steel Holding Company and Yamato Kogyo Company

Source: MEED

In 2010, the Middle East’s fledging metals industry was at the centre of project activity in the industrial sector as governments looked to push ahead with their diversification ambitions.

Billet prices have been high and rebar prices low, so a lot of these companies are trading at a loss

Bahrain-based steel executive

It was also a year that saw some relief in the pressure on the region’s metals industry caused by the falling price of commodities in 2009. During the course of the year, aluminium and steel prices showed some signs of recovery on the back of a pick up in demand. This focus on the metals sector is set to continue in the months ahead.

Fluctuating material prices

In 2011, $50bn-worth of metals projects are expected to be tendered in the Middle East and North Africa (Mena) region.

Steel producers experienced mixed fortunes in 2010. The drop in demand for construction materials including steel rebar and wire mesh in key markets, such as Dubai, as well as higher prices for semi-finished products, such as steel billets, hit independent producers hard.

Planned steel plants*
PlantCapacity (t/y)Country
Steel Mill4 millionBahrain
Shadeed Iron & Steel1.5 millionOman
Jizan Steel Plant1.5 millionSaudi Arabia
*=In the GCC; t/y=tonnes a year.
Source: MEED

The UAE’s RAK Steel has stopped production at its plant in Ras al-Khaimah and Saudi Arabia’s Union Gulf Steel and the UAE’s Union Steel Company are on the verge of being sold.

“The independents have had a tough 2010,” says a Bahrain-based steel industry executive. “Billet prices have been high and rebar prices low, so a lot of these companies are trading at a loss.”

MEED predicted in mid-2010 that independent steel producers would be experience financial difficulties due to market forces. Next year will likely witness more independents being acquired by larger state-owned entities or major foreign steel producers. Producers that import billets will struggle in particular.

MAADEN projects
ProjectCapacity (t/y)Budget
Alumina refinery1.8 million$2bn
Rolling mill250,000-460,000$2.5bn
Bauxite mine4 million$200m
t/y=tonnes a year. Source: MEED

Bahrain led the way in 2010 in terms of project activity. The highest profile award was the $1.2bn, 2.5 million-tonne-a-year (t/y) Hidd Steel Mill being constructed by United Steel Company (Sulb).

The project, a joint venture between the Bahrain-based United Steel Holding Company (Foulath) and Japan’s Yamato Kogyo Company, signed contracts in April and construction work is well under way at the facility. 

Elsewhere in the UAE, Emirates Steel Industry (ESI) is likely to continue with its planned $1bn phase three expansion in 2011. The facility will likely be sited next to its current operations, with negotiations taking place with Abu Dhabi regarding land.

It is aluminium projects that are attracting most investment. The $10.8bn Ras al-Zour aluminium complex in Saudi Arabia is the largest local industrial project and is being fast-tracked by the local Saudi Arabian Mining Company (Maaden) joint venture partner US-based Alcoa.

Planned projects in the Middle East

The centrepiece of the complex is a 740,000-t/y aluminium smelter, with a 1.8 million-t/y alumina refinery and a rolling mill, with a capacity of up to 450,000 t/y. A 4 million-t/y bauxite mine will also be developed at Al-Baitha.

The US’ Bechtel is the project manager for the smelter, with the US’ Fluor and Australia’s Worley Parsons sharing responsibilities for the rest of the facility. 

“Since the ownership issues have been resolved, the [Ras al-Zour] project has moved quickly,” a contracting source tells MEED. “The major equipment for the majority of the complex and the project managers are releasing packages for construction work.”

The project will be in its major construction phase throughout 2011 and many of the large packages available to engineering, procurement and construction (EPC) contractors will be released in the first quarter.

Elsewhere in the aluminium sector, the proposed metals park at Taweelah in Abu Dhabi had a quiet 2010. Tenders were supposed to be released for at least two of the downstream aluminium plants to be built next to the Emirates Aluminium (Emal) smelter.

Tenders for the 50,000-t/y extrusion plant joint venture between Abu Dhabi Basic Industries Corporation and the UAE’s Gulf Extrusions, along with a 150,000-t/y aluminium rod and conductor plant, have yet to be released.

“No one in the industry seems to know what is going on at Taweelah at the moment,” says a Dubai-based industry expert. “It is looking likely that nothing will happen until next year.”   

Other major aluminium projects in 2011 include the proposed extension at the Aluminium Bahrain smelter and decisions on whether to expand the capacity of Sohar Aluminium’s smelter in Oman and the Emal smelter in Abu Dhabi.    

As the Middle East forges ahead with diversification plans, 2011 promises to be a busy year in the aluminium and steel sectors. However, a shortage of gas and a lack in demand for building materials might slow progress.

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