RATIONAL

Steel industry is vital to enabling downstream development of other sectors (e.g., construction, automotive, renewables, aerospace) by providing critical raw materials and stimulating the manufacturing industry. Today, close to 75% of KSA’s Steel production capacity focuses on Rebar and Wire Rod, which are heavily used in construction, while products like Plates, Tinplate, and Round Billets are imported. Both the domestic and regional Steel markets have significant growth potential across many product segments.

Value Proposition

• Globally, crude Steel consumption reached 1,880 million metric tons in 2020, Global consumption is projected to increase 1.7% annually over the next decade. Both the domestic and regional Steel markets have significant growth potential across many product segments.

• Capitalizing on the Kingdom mineral resources and its position as the largest GCC market.

• Vast natural gas availability and low electricity prices.

• Global Crude Steel consumption projected to increase by ~2% over next decade and will remain heavily dominated by China.

• Capacity increases have outweighed closures, creating global excess which has led to depressed utilization rates, imperiling the long-term economic viability and efficiency of the industry.

•Majority of exports originate from Asia (largely from China) while imports are vastly destined for Europe and North America.

• USA is the biggest importer of steel products, led by flat products, with the majority coming from Canada, Brazil and Mexico.

• When combined, European Union members imported 40.2 Mn t in 2019, excluding intra-regional trade.

China, with more than 50% of global production, is by far the largest exporter of steel products. The top 3 exporters (China, Japan and South Korea) represented 30% of global exported volumes in 2019.

• Saudi Arabia has by far the highest capacity in the GCC region (incl. steel-making and downstream finished products). No upstream capabilities exist in the region, thereby obligating all countries to import DR grade iron ore pellets to serve as feed- stock for their Electric Arc Furnaces (EAFs). The region is experiencing structural overcapacity in rebars and wire rods with close to 60% of the total capacity concentrated in these two product segments.

A wide range of midstream and downstream products can be found manufactured in the region.

A wide range of midstream and downstream products can be found manufactured in the region.

With no domestic iron ore production, KSA is required to import large quantities of DR grade iron ore pellets and scrap from various players to feed its EAFs.

• Close to 60% of KSA’s finished steel capacity is concentrated in rebars, of which 2.8 Mn t comes from induction furnaces.

• Wire rods are produced by 4 players: Hadeed, Al Ittefaq Steel, Rajhi Steel, and Solb Steel.

• Sections are manufactured by 4 producers led by United Sulb which accounts for most of the capacity.

• Hadeed is the only producer of flat products in the Kingdom.

•Only 2 seamless tubes producers in KSA: JESCO and ArcelorMittal .

lose to 75% of KSA’s steel is consumed by the construction sector which utilizes most of the rebar and wire rod. Oil & Gas sector is the second largest consumer and the main user of seamless tubes.

• 80% of KSA’s capacity is in long products which are in overcapacity.

•Rebars has close to 100% overcapacity.

•Wire Rods has more than 50% overcapacity.

• Overall, imports dropped close to 40% since 2014.

• Imports of long products have declined significantly due to the added capacity in the Kingdom.

• However, imports of flat products have only seen a minor decrease and remain elevated due to the minimal capacity in KSA, particularly in HRC, plates and tinplate.

In fact, prices for both iron ore and steel scrap have soared over the last 5 years, more recently pushed higher by surging steel demand post COVID-19.

In fact, prices for both iron ore and steel scrap have soared over the last 5 years, more recently pushed higher by surging steel demand post COVID-19.