The company’s plant in the Eastern Province

The company’s plant in the Eastern Province

Hadeed capacity to rise to10m tonnes

The steel market is a tough one but the company is confident there will be demand in the next few years

May 2014

Saudi Iron and Steel Co (Hadeed), the metals affiliate of Saudi Basic Industries Corp (Sabic), plans to add 4 million tonnes of annual steel output capacity to reach 10 million tonnes by 2025, says a Reuters report.

“Sabic’s total steel production is 6 million tonnes per year ... Now, our ambition for 2025 is around 10 million tonnes. We have to be reasonable – steel is a very tough market,” said Abdulaziz al-Humaid, Sabic executive vice-president for metals.

Hadeed, the largest steel producer in the kingdom, has in recent months raised billet production, which helped to replace imports. Around the end of last year it also launched a plant at Jubail making 500,000 tonnes per year of reinforcing bar (rebar), bringing its total rebar output to 4 million tonnes and eliminating the need to import billets for conversion.

“We used to import billets. Now we stopped importing because we have a new furnace; we are now self-sufficient in billet production,” Humaid said.

However, Hadeed still imports 8 million tonnes per year of iron ore from Sweden and Brazil, and is studying a proposal for a joint venture in Mauritania to produce iron ore.

The feasibility study is expected to take two to three years, and if the project goes ahead it will come on line around 2019-2020, Humaid said. It would ultimately provide between 7 and 10 million tonnes of iron ore annually.

Asked if this would reduce Hadeed’s imports of iron ore from other sources, Humaid said Mauritanian supply might simply cover future expansion in Hadeed’s consumption, so imports of ore from elsewhere would remain roughly the same.

Sabic, one of the world’s largest petrochemicals companies, said last year that Hadeed planned to build two new plants in Saudi Arabia at a cost of $4.26 billion. The plants, in Rabigh on the west coast and Jubail on the Gulf coast, are still the subject of feasibility studies, Humaid said, declining to give further details.

Hadeed now has a domestic market share of 50-52 per cent. “Because of heavy imports, our market share dropped to 40 per cent, but in the last three months we are in the range of 50-52 per cent,” Humaid said.

Saudi Arabia has banned rebar exports since a period of high prices in 2008, which has hurt the profit margins of steel makers in the kingdom. Humaid noted the ban was still in place but declined to comment further.

Sabic can still export flat products, and Humaid predicted strong steel demand in the Gulf, though tough competition from producers in Turkey and China has caused prices to drop by 10-15 per cent in the last six to eight months.

“We expect demand to be strong in the region, and we expect that there will be new capacity on line, either from Sabic or from other local producers.”

The official said Hadeed sales today are very good and expected there will be demand in the next to three years “because of construction in the kingdom, and maybe in Qatar, maybe in the United Arab Emirates. We don’t think demand will be growing, but at least it will be as good as it’s been in the past two to three years.”

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