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© 2012 SteelConsult International Page www.steelconsult.com
1
Market opportunities in
Saudi Arabia and Qatar
10 December 2012, Dubai (UAE)
Metal Bulletin’s 16th Middle-East Iron & Steel
Conference 2012
© 2012 SteelConsult International Page www.steelconsult.com
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• The information included in this presentation is supplied as an information source only and on the specific understanding that while
SteelConsult International has made every reasonable effort to compile any information with care and diligence, SteelConsult makes no
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Market opportunities in Saudi Arabia and Qatar
Copyright and disclaimer
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Market opportunities in Saudi Arabia and Qatar
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
© 2012 SteelConsult International Page www.steelconsult.com
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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$)
Market opportunities in Saudi Arabia and Qatar – Global and Regional Context
Steel industry profitability has fallen sharply in 2012, though is still much higher than before the China boom
Top-70 publicly listed mills (65% of global
steel output)
© 2012 SteelConsult International Page www.steelconsult.com
Crude steel output, index (May 2008 = 100)
Source: WSA, SteelConsult
2008 2009 2010 2011 2012
0
20
40
60
80
100
120
140
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O
0
20
40
60
80
100
120
140
China & India
EU, NAFTA & Japan
World
MENA
Market opportunities in Saudi Arabia and Qatar – Global and Regional Context
The MENA steel industry has held up well, despite the turmoil in the region, and is actually one of the fastest growing regions in terms of steel production
6
© 2012 SteelConsult International Page www.steelconsult.com
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45
50
55
60
65
J F M A M J J A S O N D J F M A M J J A S O N
China Manufacturing PMI
India Manufacturing PMI
UAE PMI
Saudi Arabia PMI
PMI balance point
7
Source: Markit, HSBC
(Manufacturing) PMI Index
Market opportunities in Saudi Arabia and Qatar – Global and Regional Context
PMIs show sustained growth in UAE and Saudi Arabia, performing well compared to China and India
2011 2012
© 2012 SteelConsult International Page www.steelconsult.com
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5,000
10,000
15,000
20,000
25,000
2006 2007 2008 2009 2010 2011 2012YTD*
0
20
40
60
80
100
120
Saudi Arabia UAE
Kuwait Iraq
Qatar oil price
Oil production (‘000 barrels per day)
Source: OPEC, SteelConsult
Note: *2012 YTD annualized
Jan-Oct. YTD,
annualized
Oil price (US$/barrel)
Market opportunities in Saudi Arabia and Qatar – Global and Regional Context
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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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$)
Source: OPEC, SteelConsult
Note: * 2012 YTD annualized
Market opportunities in Saudi Arabia and Qatar – Global and Regional Context
As a result, oil based revenues of the Gulf countries are expected to reach record ever levels in 2012
Jan-Oct. YTD,
annualized
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© 2012 SteelConsult International Page www.steelconsult.com
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50
100
150
200
250
300
350
2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f
Qatar Iraq
Kuwait UAE
Saudi Arabia
Government expenditure (bn US$)
Source: IMF, SteelConsult
Market opportunities in Saudi Arabia and Qatar – Global and Regional Context
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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© 2012 SteelConsult International Page www.steelconsult.com
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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
© 2012 SteelConsult International Page www.steelconsult.com
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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
Investment size: US$ 7 billion
Population: 200,000 people
Focus: Port and logistics, light industry
and services
Size: 168 million square meters
Investment size: US$ 27 billion
Population: 2,000,000 people
Focus: Energy and labour intensive
industries
Size: 100 million square meters
Investment size: US$ 27 billion
Population: 250,000 people
Market opportunities in Saudi Arabia and Qatar – Projects and steel demand
Saudi Arabia is developing 4 entire new economic cities
Source: SAGIA
© 2012 SteelConsult International Page www.steelconsult.com
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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$)
Source: BMI, SteelConsult
Market opportunities in Saudi Arabia and Qatar – Projects and steel demand
Construction industry value in Saudi Arabia is forecast to increase at a firm (real) growth rate of 4.5% per year in the coming decade
CAGR: 8.1% (nominal), 4.5% (real)
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© 2012 SteelConsult International Page www.steelconsult.com
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1. Lusail Iconic Stadium
Capacity: 86,250
Value: US$ 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
Market opportunities in Saudi Arabia and Qatar – Projects and steel demand
Qatar plans to build 9 new stadiums for the World Cup and renovate 3
© 2012 SteelConsult International Page www.steelconsult.com
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Market opportunities in Saudi Arabia and Qatar – Projects and steel demand
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
© 2012 SteelConsult International Page www.steelconsult.com
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2
4
6
8
10
12
14
16
18
20
2007 2008 2009 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f
Qatar
Construction industry value (bn US$)
Source: BMI, SteelConsult
Market opportunities in Saudi Arabia and Qatar – Projects and steel demand
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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© 2012 SteelConsult International Page www.steelconsult.com
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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
© 2012 SteelConsult International Page www.steelconsult.com
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4
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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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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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© 2012 SteelConsult International Page www.steelconsult.com
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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
© 2012 SteelConsult International Page www.steelconsult.com
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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.
© 2012 SteelConsult International Page www.steelconsult.com
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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.
© 2012 SteelConsult International Page www.steelconsult.com
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Market opportunities in Saudi Arabia and Qatar
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