November 2021
AME expects the Middle East’s crude steel production for 2021 and 2022 to be 48Mt, up 8.3%, and 53.3Mt, up 11%, respectively, year on year.

With a specific focus on steel production in the Gulf region (excluding Iran and Iraq) and the region’s close proximity to other major steel-producing countries, the Gulf region is a potential growth area for the green steel transition. Countries of the Gulf region include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (the UAE). These six countries are members of the Gulf Cooperation Council (GCC), a regional, intergovernmental political and economic union which oversees the region’s economic development. The charter has a history dating back to 1981 and is advised by the World Bank on various aspects of urban planning, education, investment, energy and other areas. 

AME’s crude steel production forecast for GCC countries for 2021 and 2022 is 16.7Mt, up 18%, and 18.4Mt, up 10.3%, respectively, year on year. Moving forward, the long-term average growth rate is forecast to be 2.8%. Supply levels in the GCC countries have the potential to ramp up significantly, with approximately 11.3Mt of new capacity planned for construction in the future.

GCC countries’ economies are highly dependent on hydrocarbons. They are consequently strongly affected by price shocks, and government revenue is unstable. Prior to the Covid-19 pandemic, Bahrain was recovering from the oil price shock of 2014. Its large tourism industry has disappeared in the wake of the pandemic. Bahrain’s private investment and private development therefore require strengthening.

Kuwait’s economy is dominated by oil and domestic consumption. Hydrocarbons account for 85% of its fiscal revenue and 50% of its GDP. Kuwait is diversifying its economy to rely less on this sector, but implementation of the New Kuwait 2035 Development Plan has been slow. The labour market in Kuwait is highly segmented, with around 90% of its workforce employed in the public sector, meaning that the pandemic did not impact most of its citizens. Oman has recently experienced the twin shocks of Covid-19 and the oil price collapse of April-May 2020. Its hydrocarbon sector accounts for approximately 41% of its GDP, and its large tourism industry has virtually evaporated due to the pandemic. Oman currently has four potential new steel projects planned, with a total of 3.3Mt in crude steel capacity.   

Qatar is also strongly dependent on hydrocarbons and is the world’s third-largest gas exporter. Its tourism industry is preparing for the December 2022 World Cup, which is expected to strengthen its economy. Qatar Steel Company is the only steel producer in the country, and at this stage there are no planned expansions to its 3.2Mt crude steel capacity EAF. Saudi Arabia was also hit by the twin shocks of Covid-19 and the 2020 oil price collapse. The country’s economy is dominated by oil, although it has a long-term diversification plan, Vision 2030, which commenced in 2016. Saudi Arabia has nine potential new steel projects with total of 7Mt in crude steel capacity planned for the future.   

The United Arab Emirates (UAE) has seen an oversupply in its residential real estate market, which has slumped for the past six years, with prices still down by 35% from their peak in 2014,. Prices are now beginning to improve, with a forecasted increase of 3% and 2.5% for 2021 and 2022, respectively. The UAE has a large tourism industry, and the government has a long-term priority of diversification away from hydrocarbons and towards global trade, finance and the establishment of the country as a travel hub. Saudi Arabia has one potential new steel project, with 1Mt crude steel capacity, planned for the future.

Start Stop Capacity

Atoun Steel Industries Company originally planned to construct a new EAF and DRI steelmaking facility in Yanbu, Al Medina, Saudi Arabia. Construction the EAF, with crude steel capacity of 0.91Mt, commenced several years ago and was originally planned for commissioning in 2017, with investment of US$266m. However, the project has since been delayed, and no further announcements have been provided by the company. The DRI plant will have capacity of 1.2Mt, and a rebar mill with capacity of 0.5Mt.

Sulb National Company began the construction of an EAF steelmaking facility with crude steel capacity of 0.3Mt in Rabigh, Saudi Arabia, in 2012. The project has experienced multiple delays and is still under construction. Investment was US$221m, with plans for the facility to produce steel billets with capacity of 0.3Mt for re-rollers within the country. The initial plans also included phase 2 construction, which was intended to double the plant’s crude steel capacity to 0.6Mt. No further details have been provided by the company with regard to commissioning dates. 

Sun Metals plans to construct a 2.5Mt crude steel capacity EAF in Sur, Oman. The original plans were for construction and commission in 2014 and 2017, respectively, with investment of US$400m. However, these plans have been on hold since 2016 due to unfavourable economic conditions. Rolling facilities would include both a bar mill and a sections mill with capacity of 1.2Mt and 1.1Mt, respectively. The project also includes a DRI plant and scrap metal facility for the manufacture of special steel and rebars for the local Oman market, with the remainder to be exported.

New Projects: Saudi Arabia, Oman, and the UAE

Other future projects in Saudi Arabia include those planned by Al-Tuwairqi Group, Solb Steel, and Al-Yamanah Steel Industries, with crude steel capacity of 2Mt, 1Mt and 1Mt, respectively. Some other future projects in Oman include those planned by Raysut Steel Industries and Muscat Steel Industries, with EAF crude steel capacity of 0.4Mt and 0.2Mt, respectively. The UAE has one potential project planned by Abu Dhabi National Co for Building Materials (BILDCO), with EAF crude steel capacity of 1Mt.   

Overall, Saudi Arabia, Oman and the UAE have projects planned with approximate crude steel capacity of 7Mt, 3.3Mt and 1Mt, respectively. For the most part, the respective companies have not provided any construction start dates or commission dates. However, Madina Metals is currently constructing a new EAF, with crude steel capacity of 0.3Mt, in Saudi Arabia. It is expected to commission by the March quarter of 2022. Meanwhile, Hadid Majan LLC has plans to construct a new 0.18Mt EAF in Oman, with expected commissioning in 2024. Atoun Steel Industry and Solb Steel are planning DRI projects with capacity of 1.2Mt and 2.6Mt, respectively.

The dependence of GCC countries’ economies on hydrocarbon and tourism has left these countries susceptible to oil price shocks and with unstable government revenues. GCC countries are acutely aware of the vulnerabilities of having a single sector, such has hydrocarbons, driving their economies. Moving forward, these countries have long-term plans to diversity their economies. To date, however, the implementation of these plans has been slow. In the past, new steel projects in the Gulf region have often had a ‘start stop’ nature, with some projects which started in 2014 yet to be commissioned.