Manufacturing and mining help Saudi industrial output rise 20.8%

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• 721 new factories opened, creating 26,000 new jobs
• Kingdom’s mined minerals in demand from China’s manufacturers

Industrial production in Saudi Arabia increased by 20.8 percent year-on-year in June, with the mining and manufacturing sectors the main catalysts for growth.

The Saudi General Authority for Statistics (GASTAT) found that in June the Industrial Production Index (IPI) rose 20.8 percent year-on-year.

A dive into the figures of their report showed that manufacturing activity increased 29.3 percent year-on-year in June, while mining and quarrying activity rose 19.2 percent over the same period.

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Electricity and gas supply activity slipped slightly, falling 1.2 percent year-on-year. However, this seems to be making a comeback as activity in the sector increased by 9.3 percent month-on-month in June.

At the same time, the Saudi Ministry of Industry and Mineral Resources on Monday issued its latest Monthly Bulletin for Industry and Mining, which reported that in June some 501 new industrial licenses were issued, representing a total investment value of SAR13.7 billion ($3.65 billion).

A total of 721 new factories started production, creating around 26,000 new jobs.

As part of the kingdom’s drive to modernise operations, the ministry last month launched the Future Factories Program and Smart Industry Readiness Index (SIRI), which aims to automate around 4,000 factories, therefore reducing the need for low-skilled workers and increasing productivity.

As the kingdom looks to open itself up to overseas investors, the ministry said last week that foreign or joint investments represented 39 percent of total investments in the industrial sector.

This equates to 839 Saudi factories with foreign investment as of the end of May, representing eight percent of the total and around SAR 65 billion in investment from overseas.

“The government’s transformational vision for the economy is nowhere more visible than in the real estate market, with the industrial market in particular emerging as a stand-out performer,” said Faisal Durrani, London-based partner and head of Middle East research at real estate consultancy firm Knight Frank.

“Indeed, the 281 percent jump in industrial sector investments in 2020-2021 has delivered a staggering 30,000 new jobs across the kingdom.

“Rising demand for prime industrial space is being met with limited high-quality stock.

“Part of the challenge has been around the lack of institutional grade assets, but this is changing, and some developers are already turning their attention to plugging this gap.”

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Mining investment

Mining is a particularly important sector. In May, Bandar Alkhorayef, Saudi Minister of Industry and Mineral Resources, announced plans to attract $32 billion of new investment into the sector.

The ministry also issued 84 new mining licences in June, bringing the total number to 2,100.

“These targeted investments represent an important ‘down payment’ in our efforts to move beyond exploration and extraction and into the creation of integrated value chains, a central focus of our overall mining strategy,” Alkhorayef told Reuters in May.

Last month, a new report found that Saudi Arabia was the top recipient of funding as part of China’s $28.4 billion investments through its Belt and Road Initiative (BRI) during the first half of 2022, with the kingdom receiving $5.5 billion in new investment.

Ramy Al-Ashmawy, senior energy specialist at the Arab Petroleum Investments Corporation, told AGBI that mining would be one of the key sectors to increasingly benefit from the closer ties between Saudi Arabia and China.

“Beyond its global oil status, Saudi Arabia has started working on its strategic programme to develop its vast mining resources as part of Vision2030 to diversify its economy,” he said.

“Mining is a sector that China can contribute to and benefit from, as it continues to solidify its status as the world’s largest industrial manufacturer and hence has an insatiable appetite for minerals.”

Proof of the health of the mining sector is the fact that last week the Saudi Arabian Mining Co. (Maaden) reported that its Q2 2022 net profit had more than tripled to SAR 4.03 billion, on higher sales prices and increased production.