Saudi Arabia: Saudi Arabia: Rising steel demand due to multi-billion state investments
Saudi Arabia: Rising steel demand due to multi-billion state investments
Steel producers in Saudi Arabia are set for a busy few years, with increase in the industry driven by rising request due to national-backed investments and increasing activity in the private sector. However, even with additional capacity, the sector is working to bridge the supply gap, World Arab Network reports according to OBG.
The Kingdom is already the major steel producer in the Middle East and North Africa, and a recent estimate from industry research firm RNCOS states that steel consumption will rise by almost 20% per year between 2012 and 2015, with steel rod, wire, bar and reinforcing bar amount currently in high request.The increase projections for the coming years are now double those RNCOS made before in 2012, which put the increase in request at around 10% per year. The company expects steel consumption to be well over 12m tonnes this year, as additional projects come off the drawing board.
The rise in request will put pressure on local producers, who are already looking to further ramp up capacity. According to data from the Arab Iron & Steel Union (AISU), Saudi Arabia’s crude steel output is expected to hit 6.9m tonnes in 2012, well up on the 4.67m tonnes produced in 2008, while leading producers Saudi Basic Industries Corporation (SABIC), Tuwairqi Steel Mills and Rajhi Steel will collectively turn out some 7.4m tonnes of billet this year. Despite increases in capacity, the Kingdom is expected to import up to 2.5m tonnes of billet, in addition to supplies such as pipes and flats, the AISU said in early October.
The government’s ambitious infrastructure programme will feed this request and will include expanding industrial capacity, providing additional health and social services facilities and reinforcing its infrastructure backbone.Mohamed H Zakaria, the CEO and general manager of the Saudi Steel Profile Company, told English-language daily Arab News on October 1 that a number of developments, new infrastructure schemes and an expected resurgence in the petrochemicals industry in 2013, will amount result in higher demands for steel.
“Obviously, the current boom for project development continues to be a combination of high oil prices, demographic and economic increase, and a political commitment to invest in domestic infrastructure,” Zakaria said. “Request for steel continues to grow.”Andy White, the event director for “The Large 5 2012”, a building and construction industry trade fair, which will be held in Dubai in November, agrees, saying that the Saudi steel industry will remain the leading player in the region.
“Large-scale infrastructure projects have dominated the Saudi market for a number of years now and these projects continue to account for large portions of the country’s construction spend,” he said on October 8. “Such projects bring increasing request for steel products, and this is a trend we expect to see grow over the coming years, as Saudi Arabia and a lot of other GCC nations drive forward significant construction projects with major infrastructure support.”While a lot of other nations in the region as well have steel plants, or are in the process of developing them, it is unlikely there will be any risk of overcapacity in the short-to-medium term, with request for steel tipped to continue its upward trajectory for some years approaching.
This rising request offers opportunities to firms in the steel services and technology sector, both in supplying new plant and associated equipment to Saudi producers, inclunding providing support services to the industry. These openings extend well beyond the requirements for production facilities, though, taking in the provision of electronics, computer and communications equipment, infrastructure and construction services through to staff and training activities.
“Foreign producers are very active in the market, given the strong request from infrastructure projects and new home construction and little or no import tariffs,” Sharjeel Azhar, the CEO of Al Ittefaq Steel Products Company (Al Ittefaq Steel), told OBG. “Therefore, to increase market share, local steel producers must capitalise on their comparative advantages of cheap access to gas and power and lower transportation costs. Saudi companies must as well continue to capitalise on their knowledge of the local market through innovation and a diversified product range.”
A potential problem facing local steel producers seeking to increase output, however, could be the rapidly rising request for natural gas to fire smelters. With Saudi Arabia actively broadening its industrial base and increasing its electricity generation capacity to meet the needs of the public and the wider economy, gas supplies are being stretched. While this is less of an issue for the steel industry, which only needs gas for energy, if bottlenecks in the supply pipeline are not cleared, the steel sector may as well feel the pinch.
The sheer scale of the call for building materials in Saudi Arabia means that it is unlikely to achieve a supply-request balance in the near term. However, this may change later in the decade when most of the Kingdom’s investment programme projects will be nearing completion. Until then, local steel producers will be working overtime to provide the necessary supply to ensure continued expansion.
- Related Articles
- Saudi Arabia News
- SAUDI ARABIA: Saudi Arabia urgently needs 30,000 medical staff
- SAUDI ARABIA: Low literacy rate in Saudi Arabia demands compulsory education
- SAUDI ARABIA: No direct impact on Saudi budget from oil slide, says minister
- SAUDI ARABIA: KAFD has "destroyed the office market in Riyadh," says Dar al Arkan boss
- SAUDI ARABIA: Saudi investment firm Jadwa eyes real estate push
- SAUDI ARABIA: How far has the Saudi mobile market fallen, and will a trio of MVNOs be enough to restore it?
- Trending Articles
- ISRAEL: Israeli design house spreads smiles worldwide
- ISRAEL: Report estimates Royee gas prospect at 3.2 TCF
- JORDAN: Buying Israeli gas will save the Jordanian economy$1.5 billion a year.
- ARMENIA: baku, Tirana sign gas deal
- TURKEY: Erdoğan risks path to economic depression
- COLOMBIA: Colombia Farc rebels declare indefinite unilateral truce
- REAL ESTATE: Israeli design house spreads smiles worldwide
- PETROLEUM / MINING : Report estimates Royee gas prospect at 3.2 TCF
- PETROLEUM / MINING : Buying Israeli gas will save the Jordanian economy$1.5 billion a year.
- PETROLEUM / MINING : baku, Tirana sign gas deal
- ECONOMY: Erdoğan risks path to economic depression
- GOVERNMENT: Colombia Farc rebels declare indefinite unilateral truce