Market opportunities in Saudi Arabia and Qatar - … SteelConsult MB 2012_we… · reserves of oil,...

© 2012 SteelConsult International Page www.steelconsult.com

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Market opportunities in

Saudi Arabia and Qatar

10 December 2012, Dubai (UAE)

Metal Bulletin’s 16th Middle-East Iron & Steel

Conference 2012

http://www.steelconsult.com/


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SteelConsult International has made every reasonable effort to compile any information with care and diligence, SteelConsult makes no

statements, representations nor guarantees about the accuracy or completeness of the information or any part of it and that no-one

should seek to rely on the report or any part of it for any purpose.

• SteelConsult International cannot accept and disclaims all responsibility and all liability (including, and without limitation, liability in

negligence) for any costs, damages, expenses or losses incurred from any reference to the report by any party, howsoever arising.

Market opportunities in Saudi Arabia and Qatar

Copyright and disclaimer



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About SteelConsult International

Services Product Areas Why SteelConsult?

• Strategic Consulting • Steelmaking Raw Materials • Specialised in Iron & Steel

• Market Research • Semis • Expertise & experience

• Economics Analysis • Flat Products • Background in industry

• Training & In-house Workshops • Long Products • Wide contact network

• We know the steel industry

• We know the market

• Extensive databases

• Strong network of senior consultants,

with a background in the industry



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Market opportunities in Saudi Arabia and Qatar – Contents

Contents

• Global and regional context

• Projects and outlook for steel demand in Saudi Arabia and Qatar

• Other long term opportunities in MENA region

• Conclusions



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Source: SteelConsult International

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36

22

29

42

84

9198

118

140

45

8783

59

0

20

40

60

80

100

120

140

160

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12e

EBITDA (bln US$)

Market opportunities in Saudi Arabia and Qatar – Global and Regional Context

Steel industry profitability has fallen sharply in 2012, though is still much higher than before the China boom

Top-70 publicly listed mills (65% of global

steel output)



Crude steel output, index (May 2008 = 100)

Source: WSA, SteelConsult

2008 2009 2010 2011 2012

0

20

40

60

80

100

120

140

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O

0

20

40

60

80

100

120

140

China & India

EU, NAFTA & Japan

World

MENA


The MENA steel industry has held up well, despite the turmoil in the region, and is actually one of the fastest growing regions in terms of steel production

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40

45

50

55

60

65

J F M A M J J A S O N D J F M A M J J A S O N

China Manufacturing PMI

India Manufacturing PMI

UAE PMI

Saudi Arabia PMI

PMI balance point

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Source: Markit, HSBC

(Manufacturing) PMI Index


PMIs show sustained growth in UAE and Saudi Arabia, performing well compared to China and India

2011 2012



0

5,000

10,000

15,000

20,000

25,000

2006 2007 2008 2009 2010 2011 2012YTD*

0

20

40

60

80

100

120

Saudi Arabia UAE

Kuwait Iraq

Qatar oil price

Oil production (‘000 barrels per day)

Source: OPEC, SteelConsult

Note: *2012 YTD annualized

Jan-Oct. YTD,

annualized

Oil price (US$/barrel)


YTD oil production of the major producers in the Gulf, and average annual oil prices, are both at record ever levels in 2012 YTD…

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0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010 2011 2012YTD*

Qatar

Iraq

Kuwait

UAE

Saudi Arabia

Petroleum exports (bn US$)

Source: OPEC, SteelConsult

Note: * 2012 YTD annualized


As a result, oil based revenues of the Gulf countries are expected to reach record ever levels in 2012

Jan-Oct. YTD,

annualized

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0

50

100

150

200

250

300

350

2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f

Qatar Iraq

Kuwait UAE

Saudi Arabia

Government expenditure (bn US$)

Source: IMF, SteelConsult


Owing to increased government expenditure, including on public utilities and affordable housing, the MENA countries can expect some of the strongest growth in steel demand in the coming years

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Contents




• Conclusions



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Focus: Logistics, agribusiness, mineral,

construction materials

Size: 156 million square meters

Investment size: US$ 8 billion

Population: 80,000 people

Focus: Knowledge based industry with

an Islamic focus and services

Size: 4.8 million square meters



Focus: Port and logistics, light industry

and services



Population: 2,000,000 people

Focus: Energy and labour intensive

industries




Market opportunities in Saudi Arabia and Qatar – Projects and steel demand

Saudi Arabia is developing 4 entire new economic cities

Source: SAGIA



0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f

Construction industry value Saudi Arabia (bn US$)

Source: BMI, SteelConsult


Construction industry value in Saudi Arabia is forecast to increase at a firm (real) growth rate of 4.5% per year in the coming decade

CAGR: 8.1% (nominal), 4.5% (real)

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1. Lusail Iconic Stadium

Capacity: 86,250

Value: US$ 662 mn

2. Shamal Stadium

Capacity: 45,120

Value: US$ 251 mn

3. Al-khor Stadium

Capacity: 45,330

Value: US$ 251 mn

4. Al-Wakrah Stadium

Capacity: 45,120

Value: US$ 286 mn

5. Al-RayyanStadium

Capacity: 44,740

Value: US$ 135 mn

6. Doha Port Stadium

Capacity: 44,950

Value: US$ 202 mn

7. Education City Stadium

Capacity: 45,350

Value: US$ 287 mn

8. Qatar University Stadium

Capacity: 43,520

Value: US$ 300 mn

9. Al-Gharafa Stadium

Capacity: 44,740

Value: US$ 135 mn

10. Sports City Stadium

Capacity: 45,330

Value: US$ 251 mn

11. Khalifa International

Stadium

Capacity: 68,030

Value: US$ 71 mn

12. Umm Salal Stadium

Capacity: 45,120

Value: US$ 251 mn

Source: Commercial Bank Capital, MEED


Qatar plans to build 9 new stadiums for the World Cup and renovate 3



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The World Cup may well require some 3mln tonnes or more of extra steel over the next ten years, or 300k tonnes per year or more on average

• The World Cup 2014 and Olympics 2016 in Brazil are estimated to require 8mln tonnes of extra

steel over a ten year period*.

• It is estimated that the Olympics 2008 in Beijing required at least 3mln tonnes of steel for

construction of the stadiums, the Olympic Village and transportation infrastructure*.

• The World Cup 2018 in Russia is expected to generate 2.5-3mln tonnes of steel demand**.

• As an indication, above references would suggest the World Cup in Qatar may well require at

least 3mln tonnes of steel demand, or some 300k tonnes per year, or more, on average until

2022.

• While the new stadiums will be the eyecatchers of the World Cup, they may consume ‘only’

some 100-200ktonnes of steel in total. It is the supporting infrastructure that will consume the

bulk of the extra steel requirements.

Source: Brazilian Steel Institute*, Evraz**, SteelConsult



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12

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2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f

Qatar

Construction industry value (bn US$)

Source: BMI, SteelConsult


Construction spending in Qatar will be supported by the World Cup preparations as early as 2013, but the main boost is expected to come from 2017 onwards

…But increasing more significantly

between 2017 and 2022

CAGR: 14% (nominal), 9.5% (real) CAGR: 8.5% (nominal), 4.8% (real)

Construction activity growth, and

hence steel consumption, expected

to pick up from 2013…

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Contents




• Conclusions



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'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 ff

Finished steel consumption, Iraq (m tonnes)

Source: SteelConsult

• Iraq has seen steel demand grow fast since 2007,

but at 2.1m tonnes of steel in 2011, or 68kg/head,

Iraq’s consumption is still embryonic.

• If the country stabilizes further, its huge, dormant

potential steel market could gradually be unlocked:

– The country has 31m inhabitants;

– Decades of underinvestment and violence

have left the country in ruins. Huge

investments need to be made for the

(re)building of infrastructure, industry, utilities

and housing;

– At 115bn barrels, it holds the world’s 3rd largest

reserves of oil, after KSA and Iran.

• Over US$200bn of existing and future capital

projects are planned in Iraq, and the country is

expected to see major contracting activity in the next

5-10 years.

• In a stable situation, we estimate steel consumption

in Iraq could grow to at least 10m tpy.

Potential

market in

future

Market opportunities in Saudi Arabia and Qatar – Other long term opportunities in MENA region

Longer term opportunity #1: Iraq has become a steel market of significance again in the last three years, though so far requirements are mostly imported, 90% of which from Turkey and Ukraine. The country has a huge potential for further steel consumption growth.

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0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Other GCC

UAE

Saudi Arabia

Car imports/sales GCC (‘000 units)

Source: UN Trade Statistics, SteelConsult

Market opportunities in Saudi Arabia and Qatar – Other long term opportunities in MENA region

Longer term opportunity #2: The GCC has an opportunity for 7 medium sized car plants in Saudi Arabia and/or the UAE, or ~2m tpy of auto steel

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Contents




• Conclusions



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Market opportunities in Saudi Arabia and Qatar – Conclusions

Conclusions (1)

• While global steel markets remain under pressure, and parts of the MENA region continue to face

political instability, steel output and demand in the MENA region have held up relatively well during

the last 2 years.

• Moreover, oil production in the GCC has increased, as have oil prices, and government revenues

have risen to record levels.

• Vast construction investments in Saudi Arabia, incl. four new cities, will lead to (real) growth of

4.5% per annum on average between 2012 and 2021, and associated growth in steel

requirements.

• Prospects are also favourable in Qatar, where the National Vision 2030 and preparations for the

2022 World Cup are expected to drive construction activity and steel consumption. Growth is

expected to pick up from 2013 onwards, but accelerate especially from 2017.

• The hosting of the World Cup may well add another 3mln tonnes or more to Qatar’s steel

demand over the next 10 years, or 300k tonnes (or more) per year on average, most of which will

be required for supporting infrastructure.



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Market opportunities in Saudi Arabia and Qatar – Conclusions

Conclusions (2)

• In the longer term, we see two other potential key drivers of growth in the region:

• The further development of Iraq could add another 8m tonnes of steel or more to regional

demand;

• The GCC region is importing some 1.5m vehicles per year, growing to over 2m units by

2017, presenting an opportunity for diversification and increase of local steel consumption,

esp. in higher quality flat steels.



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