Saudi Arabia joins the dots from minerals to manufacturing

Unsplash/Lenny Kuhne

• Kingdom is expanding supply chain strategy
• Cheap power vital to chains
• Progress ‘very fast, very smart’

Consider for a moment how many different steps there are between digging a lump of iron ore out of the ground in Mauritania and pressing the starter button on a new electric vehicle (EV) in Riyadh.

The ore must be mined, concentrated, combined with other elements, put through a furnace, a casting machine, cold- or hot-rolled, then galvanised or coated, shaped and then shipped. 

All of this is then slotted together with hundreds of other electrical, electronic, aluminium, copper, lithium, rare earth, glass and plastic parts until finally it becomes an EV that rolls off the assembly line. 

• Gulf steel has a keen edge on Chinese and Indian rivals
• Saudi’s Maaden unit strikes deal with EV maker Lucid
• Saudi startup’s infrared tech has ‘game-changing’ potential

Wholesale and retail sales, ad campaigns and, of course, an end-customer are all then also required before someone can ultimately push the starter.

Given its length, few around the world have this entire, international value chain all within their grasp. 

Now, one newcomer is about to join their ranks: Saudi Arabia.

The kingdom plans to be present at every link in that value chain – and many others too – in just a few years’ time.

“After its first forays into commodities,” Ionut Lazar, principal consultant at London-based CRU Group, told ABGI, “Saudi Arabia is starting to integrate these with downstream processing hubs and facilities for manufacture. It’s a more ambitious agenda than we’ve ever seen before.”

Value in chains

Aluminium is a good example of how the Saudi strategy is currently working.

At the Al Baitha mine operated by Ma’aden, a leading mining company, there are significant deposits of bauxite – the basic raw material for aluminium production. 

Yet the mine is located far inland in Al Qassim province – 650km from industrial hubs, ports and other infrastructure on the Gulf coast.

“This made it quite expensive to set up the value chain,” Lazar said. 

However, energy-rich Saudi Arabia has given Ma’aden access to very cheap electricity. 

As a result, the mining company has been able to set up the lowest-cost aluminium smelter in the world.

“Now,” Lazar continues, “they are linking that up to manufacturing aluminium frames for solar panels. These then go to solar renewable energy farms, which in turn generate more cheap electricity.” 

This low-cost energy is also low carbon – a factor that absorbs the higher costs of the rest of the value chain and makes the eventual product greener than many of its rivals.

The kingdom is also boosting other metals and minerals value chains.

Manara Minerals – a joint venture between Ma’aden and the Public Investment Fund (PIF), the kingdom’s sovereign wealth fund – was set up precisely to do this, both within Saudi Arabia and overseas.

“Both foreign investment and domestic development are mutually necessary in order to develop Saudi Arabia into a large mineral processing hub,” said Lazar.

A good example of this is the Saudi Mauritanian Metals and Steel Company (Takamul). This brought together the Saudi Basic Industries’ (Sabic), Saudi Iron and Steel Company (Hadeed) and the Mauritanian Company for Industry and Mines to develop Mauritania’s Atomai iron ore site.

That development will include a lower-carbon direct reduced iron smelter. This will produce pellets, and these, rather than iron ore itself, will be shipped to Hadeed’s huge integrated steel plant in Al Jubail. 

“The Saudis would very much like to be less dependent on importing raw materials,” Burak Odabasi, Middle East and North Africa trade journalist for Kallanish, told AGBI. 

The DRI pellets can then be used to produce steel “flats” – products such as plate, large diameter pipes and coils. 

Flat products are more targeted towards manufacturing than the Gulf’s current over-supply of “long” steel, such as rebar (reinforcing bar), which is construction-sector oriented. 

Certain manufactured products have also already been highlighted as the recipients of this Saudi-made steel plate.

“Saudi Arabia wants its own electric vehicles,” said Odabasi, “its own local brands and appliances.” 

The kingdom launched Ceer, its EV manufacturer, in 2022 and aims for half a million EVs on its roads by 2030 – a figure roughly equal to current annual demand for cars across Saudi Arabia.

Battery metals are also critical to this. Manara Minerals and other investments are part of a “greater objective of installing primary processing assets in base metals, battery metals and other key elements,” Lazar adds.

In January, Manara announced plans to set up a metals trading arm in support of this strategy.

“The Saudis are working on all this very fast and being very smart,” Odabasi said.

Joined-up thinking

The question for some, however, is whether Saudi Arabia is moving too fast.

“The key will be to establish the right priorities and sequence for project development so that infrastructure can be developed alongside flagship projects and a gradual build-up can be sustained,” said Lazar.

If sequencing breaks down, the PIF and the Saudi government’s deep pockets may also help fill the gaps.

“They say that they can always import the production they need if there are shortfalls,” said Odabasi. “The time will in any case only be a year or two between stages.”

In the meantime, some core areas, such as solar power and basic metals are likely to see increasingly rapid development. 

“We may see more smaller scale projects too in future,” said Lazar, “although the likelihood is that the investment will continue to target top-tier assets for now.”

With whole value chains being linked together, Saudi Arabia is continuing to think big, as it links together minerals in the ground with state of the art products in the local showroom.