Saudi Arabia has witnessed significant advancements in its steel industry over recent years. In a strategic market analysis of the sector, experts from Glasgow Research & Consulting shed light on the state of the steel market and its various segments, and provide an outlook for the coming years.
The Saudi Arabian steel industry is a cornerstone of the country’s economic development, catering primarily to the building and construction sector. The demand for finished iron and steel products is projected to grow at a compound annual growth rate (CAGR) of 3.9% from 2023 to 2026, driven by mega-projects such as Neom, Red Sea, Qiddiya, and Diriyah.
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These ambitious projects are not only transforming the skyline of Saudi Arabia but also significantly boosting the demand for steel products.
In the realm of tubular products, the demand for welded pipes surpasses that of seamless pipes. This demand is predominantly driven by the water, waste, and oil & gas transportation sectors. Among welded pipes, helical submerged arc welded (HSAW) pipes are more sought after compared to longitudinal submerged arc welded pipes. This is because HSAW pipes are extensively used in water segments, where numerous projects are either under construction or in the planning stage.
Segmentation and market numbers
An overview of the various segments within the steel sector:
Rebars
Market Size (2023): 9.8 million tonnes (MT)
Projected CAGR (2023–2028): 5.4%
Market Dynamics: Rebars constitute more than half of the total steel demand in KSA, predominantly used in the construction of residential and non-residential buildings. The sector’s substantial consumption of long products like rebars is a testament to its pivotal role in driving steel demand.
Wire Rods
Market Size (2023): 1.5 MT
Projected CAGR (2023–2028): 4.4%
Market Dynamics: Similar to rebars, wire rods are extensively used in construction activities. The market is expected to grow steadily, supported by ongoing and upcoming infrastructure projects.
Sections
Market Size (2023): 0.6 MT
Projected CAGR (2023–2028): 5.3%
Market Dynamics: Sections are essential in structural applications, particularly in the construction of large buildings and infrastructure projects. The demand is projected to grow robustly due to increased government expenditure on infrastructure.
Hot Rolled Coils (HRC)
Market Size (2023): 1.3 MT
Projected CAGR (2023–2028): 3.4%
Market Dynamics: HRC is widely used in manufacturing and industrial applications. The growth in demand is linked to the expansion of the industrial sector and the modernization of existing manufacturing facilities.
Cold Rolled Coils (CRC)
Market Size (2023): 0.6 MT
Projected CAGR (2023–2028): -0.1%
Market Dynamics: Although the demand for CRC is relatively stable, it faces competition from alternative materials and processes. However, its application in precision manufacturing keeps it relevant.
Coated Flats
Market Size (2023): 0.6 MT
Projected CAGR (2023–2028): -3.8%
Market Dynamics: Coated flats are used in various industries including automotive and appliances. The demand for these products is expected to decline slightly due to market saturation and competition.
Seamless Pipes
Market Size (2023): 0.8 MT
Projected CAGR (2023–2028): 2.6%
Market Dynamics: Seamless pipes are crucial for the oil and gas industry, particularly for high-pressure applications. The sector’s growth is driven by the ongoing investments in oil and gas exploration and production.
Welded Pipes
Market Size (2023): 2.1 MT
Projected CAGR (2023–2028): 3.5%
Market Dynamics: Welded pipes are predominantly used in water, waste, and oil & gas transportation sectors. The demand is driven by infrastructure development projects focused on improving water and waste management systems.
Competitive landscape
The Saudi steel market is characterized by a mix of domestic and international players. Major domestic players include Hadeed, Al Tuwairqi Holding Group, and Al Rajhi Steel Industries.
Hadeed, a subsidiary of Saudi Basic Industries Corporation (Sabic), is the largest steel producer in the Kingdom, holding a significant market share. International players like ArcelorMittal also have a presence through joint ventures, contributing to the competitive dynamics of the market.
Domestic Players:
- Hadeed: The largest steel producer in the Kingdom, Hadeed boasts integrated steel mills and a strong presence in construction and infrastructure sectors.
- Al Tuwairqi Holding Group: A major producer of long steel products like bars and rods, catering to the construction industry. It also has Crude steel and semi-finished steel production capability.
- Al Rajhi Steel Industries: Third largest steel manufacturer with 9 manufacturing units across Saudi Arabia.
International Players:
- ArcelorMittal: This global behemoth has a presence in Saudi Arabia through its joint venture Dammam Steel, competing in both long and flat products.
The dynamics of demand and supply
The demand-supply dynamics in the steel industry of KSA present a promising outlook for new entrants.
Key developments on the supply side include:
- Capacity Expansion: Planned expansions in CRC and HRC segments could potentially lead to an overcapacity situation by 2028. However, this is also an indicator of the industry’s growth potential.
- Import Dependency: Despite the growth in domestic production, the market still relies on imports for certain products like coated flats and HRC. This presents an opportunity for new players to cater to the domestic market and reduce import dependency.
Key developments on the demand side include:
- Construction Boom: The ongoing and upcoming mega projects ensure a steady demand for steel products. New entrants can leverage this demand to establish a foothold in the market.
- Economic Diversification: The focus on industrial and manufacturing sectors as part of Vision 2030 will continue to drive the demand for steel.
The outlook for the period ahead is broadly positive:
Self-Sufficiency Goals: By 2030, KSA aims to achieve near self-sufficiency in steel production, increasing the domestic supply coverage from 67% in 2019 to 99.3% by 2030. This goal is supported by strategic investments and policy support from the government.
Regional Competitiveness: The growth in domestic manufacturing will improve the competitiveness and supply capability of KSA’s steel industry at the regional level, opening up export opportunities. Future Outlook
Government Initiatives: Vision 2030 aims to diversify the economy and reduce dependence on oil. This includes massive investments in infrastructure, construction, and industrial projects.
Mega-Projects: High-profile projects like NEOM and Qiddiya are set to drive demand for steel products significantly.
Industrial Expansion: The growth of the manufacturing and industrial sectors will further boost demand for steel products, particularly HRC and CRC.
Conclusion
The steel industry in Saudi Arabia is poised for substantial growth, supported by robust government initiatives and strategic investments in infrastructure and construction projects. While the market faces challenges such as overcapacity in certain segments, the overall demand outlook is positive. The industry’s growth trajectory aligns with the broader economic goals of Vision 2030, positioning Saudi Arabia as a key player in the global steel market.
In conclusion, the Saudi steel industry offers a dynamic and evolving landscape, presenting numerous opportunities for growth and development. As the country continues to invest in its infrastructure and diversify its economy, the demand for steel products is expected to rise, driving the industry’s expansion and contributing to the Kingdom’s economic prosperity.
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