Saudi Arabia to build three iron and steel plants worth $9.3bn

The kingdom aims to reduce imports in the sector and boost its manufacturing capabilities

The kingdom has embarked on a national plan for the structuring of the iron and steel sector. Bloomberg

Saudi Arabia plans to build three iron and steel projects worth 35 billion Saudi riyals ($9.3bn) as it seeks to develop its industrial sector as part of the kingdom's economic diversification agenda.

The projects will have a combined production capacity of 6.2 million tonnes, Bandar Al Khorayef, Saudi Arabia's Minister of Industry and Mineral Resources, said on Monday.

One of the projects will be an integrated iron sheet production complex with a capacity of 1.2 million tonnes a year, which will focus on shipbuilding, oil pipes and platforms, and enormous oil reservoirs, the Saudi Press Agency (SPA) reported.

A second project, currently under negotiation with international investors, will be an integrated iron surface production complex with an annual capacity of four million tonnes of hot rolled iron, one million tonnes of cold rolled iron and 200,000 tonnes of tin-plated iron and other products.

The complex intends to serve the automotive, food packaging, household appliances and water pipe sectors, the agency said.

A third factory will be established to produce circular iron blocks with an estimated production capacity of one million tonnes a year, to support the oil and gas industry's unwelded iron pipes.

Saudi Arabia, the Arab world's largest economy, is expanding its industrial, manufacturing and mining sectors as part of its Vision 2030 strategy that aims to reduce its reliance on oil revenue and diversify its economy.

The kingdom's industrial production index (IPI) for July rose by 17.7 per cent, compared with the same month of last year, the General Authority for Statistics (Gastat) said in its latest update.

“This increase can be attributed to the increase in mining, quarrying, manufacturing and electricity and gas supply,” it said.

While manufacturing activity increased by 32.6 per cent annually in July, mining and quarrying rose by 14.1 per cent, Gastat data found.

The kingdom has also embarked on a national plan for the structuring of the iron and steel sector, which contains 41 recommendations to enable and sustain the sector, Mr Al Khorayef said.

These include the review and approval of 16 policies and legislation, as well as collaboration with the private sector on long-term solutions such as the establishment of an iron academy and a research and development centre to increase the efficiency of factory operations and create high-quality jobs for Saudi citizens.

“This will help us face and address global and local changes in order to ensure the sector's sustainability and resiliency in the face of economic and geopolitical variables,” Mr Al Khorayef said.

The kingdom's priorities include the local production of steel products of all types, such as heavy iron sheets for the oil and gas, defence and construction sectors, as well as tin-plate steel for the canned food sector and flat tin-plate for car and water pipe makers.

The ministry is also working on reducing imports in the iron and steel sector by 50 per cent to maintain a “financially and operationally sustainable sector” and ensure the availability of “critical supply chains such as iron ore”, SPA said.

The kingdom has already started attracting international manufacturers to set up base in the country. Earlier this year, Lucid Group, the car maker backed by Saudi Arabia's Public Investment Fund, said it would begin construction of its first international manufacturing centre in the kingdom in the first half of this year.

US-listed Lucid has signed agreements with the Ministry of Investment of Saudi Arabia, the Saudi Industrial Development Fund and the Economic City at King Abdullah Economic City (Kaec) for the factory.

At the Kaec plant's peak, the company expects to manufacture up to 150,000 vehicles a year.

In April, Saudi Arabian Military Industries (Sami) also signed a preliminary agreement with Boeing to form a kingdom-focused joint venture to localise manufacturing and create more jobs in the country.

Under the agreement, the parties will form a company to provide services, including maintenance, repair and overhaul for military rotary platforms currently operating in the kingdom, Sami said at the time.