Aramco, PIF and China's Baosteel sign agreement to build Saudi steel plate complex

First such project in GCC expected to have annual production capacity of up to 1.5 million tonnes

The steel plate factory to be built in the kingdom is expected to localise the production of heavy steel plates and create jobs for Saudi citizens. Photo: Aramco

Saudi Aramco, the world's largest oil-producing company, the Public Investment Fund and China's Baoshan Iron and Steel (Baosteel) have signed an agreement to build the kingdom's first steel plate manufacturing complex.

The complex is projected to have an annual production capacity of up to 1.5 million tonnes annually and will be built in Ras Al Khair Industrial City, one of the four new special economic zones recently announced by Saudi Crown Prince Mohammed bin Salman, the three companies said on Monday.

The complex will feature equipment mindful of the environment, including an iron furnace that runs on natural gas and emits 60 per cent less carbon emissions than traditional furnaces. Its compatibility with hydrogen could increase this to 90 per cent.

The companies did not disclose the value of the project, which would be the first of its kind in the GCC.

The project — which is under Aramco's flagship industrial investment programme Namaat and supported by the government’s Shareek initiative — is “expected to create jobs and contribute to economic growth and diversification”, Amin Nasser, president and chief executive of Saudi Aramco, said.

“This joint venture is also an example of bringing together expertise from other sectors. With Baosteel and the PIF supporting in capacity building in the kingdom’s industrial sector, Aramco aims to create additional value for our company and our partners,” Mr Nasser said.

Shareek was launched in 2021 by Prince Mohammed to boost the contribution of local companies towards the country’s economic growth, and is part of an investment programme worth 27 trillion Saudi riyals ($7.2 trillion) through the decade.

Namaat, launched in 2020 and expanded in 2022, is Aramco's programme that aims to tap into the vast opportunities available in Saudi Arabia to create value and drive economic expansion and diversification, while also supporting industrial investment partnerships and creating jobs for citizens.

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.

In September, the kingdom set out plans to build three iron and steel projects worth 35 billion riyals, with a combined production capacity of 6.2 million tonnes, as part of the strategy.

Business activity in the kingdom's non-oil private sector economy remained robust in March as output and new business continued to expand, further supporting employment growth in the kingdom at the end of the first quarter, the Riyad Bank purchasing managers' index showed last month.

Business confidence in the country hit a two-year high in January as output growth strengthened, the Riyadh-based lender said in February.

The joint venture will allow the PIF, Saudi Arabia's sovereign wealth fund, to boost its contribution to the economy, as well as expand its growing portfolio. The fund has invested in 13 sectors and established 77 new companies locally, said Yazeed Al Humied, deputy governor and head of Middle East and North Africa investments at the PIF.

“The PIF is diversifying the Saudi economy by unlocking opportunities and enabling key strategic sectors in the local market. This partnership … will strengthen Saudi Arabia’s industrial development and enable its role as a supplier within the metal industry,” he said.

The steel plate factory is expected to boost the domestic manufacturing sector through the localisation of the production of heavy steel plates, the transfer of expertise between the three companies and creating export opportunities, the companies said.

“The project aims to contribute positively to the localisation of the steel industry chain, job creation and local economic prosperity in Saudi Arabia,” said Zou Jixin, chairman of Baosteel.