Market analysis of GCC's $3 billion steel production sector

11 January 2022 4 min. read

GCC’s steel production sector is under pressure, mainly due to Covid-19 induced reduction in manufacturing output. But with a global rebound and a string of megadevelopments on the horizon, the sector is set for a brighter outlook, according to market analysis by Glasgow Consulting Group.

The research and consulting firm was commissioned by a steel manufacturer in the GCC to conduct a strategic assessment into the state of the industry. While the full confidential report has not been disclosed, a number of key insights have been shared with ConsultancyME – a round-up of the main insights.

In 2020, GCC’s steel production sector manufactured 3.3 million tons of steel, with a value of around $3.1 billion. The market has however been on a decline since 2017, when volume and stood at 4 million tons and $4.1 billion respectively.

GCCs steel production sector

In 2020, much of the decline stemmed from Covid-19 related demand drops caused by halts on construction projects and resultant suspension of manufacturing activates. According to Glasgow Consulting Group’s analysis, over 550 projects worth $60 billion were cancelled or suspended in the GCC during March-December 2020.

In the years 2017 to 2019, demand dropped mainly on the part of the completion of high number of construction projects planned in early 2020s, in particular in Saudi Arabia, UAE and Qatar.

GCC’s steel production by country

With a value of $1.4 billion, the region’s largest economy Saudi Arabia is also the GCC’s leading steel manufacturer, followed by the UAE with a value of $1.1 billion. Oman’s industry is slated for $235 million in production value, with both Kuwait and Qatar hovering above the $150 million mark.

Notably, while Qatar was the third largest consumer of steel products until 2017, the emirate has been displaced by Oman, which has benefitted from a number of new manufacturing plants that added tons of capacity to its footprint, particularly in the south of the Sultanate.

Types of steel manufacturing

Steel sheet fabrication is the largest segment of the steel production sector, accounted for 46% of GCC’s market by value and 50% market by volume (2020 data). Demand for this segment is mainly driven by the construction sector, and oil & gas industry where platform fabrication requires significant use of steel sheets and plates.

GCC’s steel production by raw material

Light section fabrication represents for the second largest segment by value and third largest by volume, mainly due to the product’s use in secondary steel work such as roof fabrication, purlins and side rail fabrication.

The outlook

Looking ahead, the experts from Glasgow Consulting Group expect the GCC’s steel manufacturing sector to rebound, although the impact will not be seen immediately in 2022.

For starters, the region (which accounts for between 2% to 3% of global production in value) will benefit from a growing worldwide market, driven by continued recovery of the global economy and the resumption of construction as well as industrial activities. Throughout the course of this year, the pre-pandemic level of activity is expected to be reached.

Global steel production market outlook

According to the analysis, the global market will grow by between 3% and 4% per year in the period up to 2025, to reach a value of $139 billion by 2025 on the back of a 151 million tons in production volume. Riding this wave, the Middle East’s industry is expected to co-benefit, with a share of local production exported to other parts of the world.

Meanwhile, while project spending across industries is expected to remain subdued in 2022 and the early parts of 2023, investments are then expected to pick up meet the deadlines of projects planned for respective National Visions in the GCC region, with Saudi Arabia’s Vision 2030 the main driver of megadevelopments.

In the Kingdom, Neom (the Kingdom’s flagship project), the Red Sea Project, and Qiddiya (the capital of entertainment) are some of the key mega projects shaping the infrastructure and construction roadmap.