Saudi Arabia’s US$730 billion Public Investment Fund (PIF) has won backing from leading Chinese steel corporation Baoshan Iron & Steel (Baosteel) to establish the Kingdom’s first integrated steel plate manufacturing plant – and the fund is creating possibilities in green steelmaking through new partnerships.
Baosteel is taking half the equity in the joint venture with the remainder shared equally by PIF and Saudi Arabia’s national oil company Aramco. The plant is set fr completion by end-2026 and will be in Ras al-Khair Industrial City, one of four new Special Economic Zones with steel plate production capacity of up to 1.5 million tonnes per year, utilizing domestic natural gas resources with the option of hydrogen conversion. Output will serve various strategic industries, including the production of pipelines, shipbuilding, rig manufacturing, offshore platform fabrication and tank and pressure vessel manufacturing.
Yazeed A. Al-Humied, Deputy Governor and Head of MENA Investments at PIF, said: “PIF is diversifying the Saudi economy by unlocking opportunities and enabling key strategic sectors in the local market. This partnership aims at establishing an integrated steel plate manufacturing facility that will strengthen Saudi Arabia’s industrial development and enable its role as a supplier within the metal industry.”
Saudi Arabia would be the project’s primary target market, with plans to export to the GCC and broader MENA region. It is expected to create new jobs and significantly reduce reliance on imported steel, serving customers in several strategic industrial sectors including pipelines, shipbuilding, rig manufacturing, offshore platform fabrication and tank and pressure vessel manufacturing. It also would aim to serve the construction, renewables and marine sectors.
Last May, the Ministry of Industry and Mineral Resources announced it had secured financing for a US$4 billion steel plate mill in Saudi Arabia, which is the largest of nine projects in the minerals and metals sector. The Baosteel-backed project represents the first phase of the development. Other projects include a “green” flat steel complex and a US$2 billion electric vehicle battery metals plant. The steel industry is regarded by Saudi Arabia as a crucial element of its bid to create integrated value chains, linking domestic natural resources in mining and oil & gas to end-market.
The project is supported by Kingdom’s Shareek programme for large companies and Aramco’s Namaat program, which aims to establish strategic partnerships that drive Saudi Arabia’s economic, supply chain and industrial investment diversification and expansion. It also aligns with PIF’s strategy of supporting strategic industries to diversify the economy.
The investment is not PIF’s first in the steel industry. Last year, PIF signed a MoU with Korean steelmaker POSCO and Samsung C&T to develop a new green hydrogen production plant. POSCO and Samsung C&T signed a Master Service Agreement covering technical development of liquid nitrogen for global green hydrogen production and storage in November 2021. PIF already has a close relationship with the Korean conglomerate. In 2015, the fund acquired a 38% stake in its subsidiary POSCO Engineering and Construction for US$1.1 billion. POSCO E&C is one of the world’s leading global engineering and construction companies that specializes in engineering and building industrial and energy facilities, infrastructure and urban development. The agreement included commitments to strategic plans in Saudi Arabia, such as the establishment of a Saudi engineering and construction joint venture company.
Decarbonization of steelmaking is a high priority globally, but high energy costs are a major challenge. Most steelmakers are already embarking on pilot projects or research projects into creating decarbonised steel using hydrogen. The decarbonisation trend will also bring opportunities for the steel sector as end-markets evolve and investment in coal supply declines