The Mining and Metals processing sector has grown significantly over the last few years. Going forward, it has tremendous growth opportunities in line with Saudi Vision 2030's goal to have "a mining sector contributing to the national economy at full potential".
In addition, the country is going through a large industrial and economic diversification that will grow resource-heavy manufacturing sectors such as industrial machinery, electrical equipment, automotive, etc., and thus lead to an increase in demand for metal and mineral products. Moreover, Saudi Arabia's proximity to other MENA countries puts local manufacturers in a great position to export to those countries. This large demand, coupled with the abundance of resources in Saudi soil, creates significant investment opportunities for private sector investors
Saudi Arabia’s metals and mining sector is preparing for rapid expansion in accordance with Vison 2030 objectives. As the nation embarks on its journey to diversify from oil and gas, the role of the metals and mining sector is to gain increasing importance.
Large market demand for metals and mineral products already exists, particularly from regional players but also within KSA itself. The Kingdom has a healthy reserve of untapped mining potential that can comfortably compensate for the diversification from the oil and gas sector.
The private sector is poised to enter this market as favorable conditions now bestow foreign investors, keen to collaborate with KSA companies. Great cost advantages await metal and mining companies that take advantage of the strong demand local utilities, raw materials, suppliers, contractors and talent pool. With significant government commitment and support to enable the sector, investors can feel confident in the future growth of the KSA mining and minerals industry.
Large market demand for metals & mineral product
Saudi Arabia has a healthy reserve of untapped mining potential valued at SAR 4.88 trillion (USD $ 1.3 trillion), with 20 million ounces of below ground gold reserves. The Kingdom currently accounts for a sizeable 37.9% of the Middle East and Africa’s SAR 60 billion (USD 16 billion) metals and mining industry market.
In addition, Saudi Arabia is going through economic and industrial growth, leading to significant increase in demand for mined commodities that serve key developing sectors.
Access to natural resources to serve local and global market
Saudi Arabia is considered the largest by landmass in the Middle East and 13 in the World, with an abundant and diverse range of over 48 minerals and metal resources, which at least 15 minerals that are commercially viable. With some of the world’s largest reserves of phosphate and tantalum, Saudi Arabia is becoming a significant market for mineral extraction and processing. The central and northern parts of the country contain large amounts of bauxite, in addition to deposits of silver, zinc, copper, magnesite, and kaolin. KSA is the largest gold producer in the Middle East with a production of around 400,000oz in 2019. The mining potential of these resources is still significantly untapped, which presents the private sector with large and lucrative investment opportunities that capitalize on and serve the under-supplied market.
High potential for import substitution to meet local demand
KSA's demand for metal and mineral products currently exceeds local supply, signifying great potential for domestic mining operations to take advantage of import substitution. Saudi Arabia is the world’s 3rd largest net importer of copper, 4th largest net importer of Aluminum products, 5th largest net importer of ceramic products and 12th largest net importer of sodium carbonates. Furthermore, iron and steel were among the largest commodity imports to Saudi Arabia. The supply gap of mineral/metal resources translates into multi-billion dollar opportunities for local production and value chain integration.
Great cost advantages supporting local production
KSA offers businesses access to high-quality raw materials and utilities at competitive prices. Fantastic cost advantages await investors who commit to producing minerals and metals locally. For example, Saudi is one of the lowest aluminum production cost, moreover, Phosphate (Diammonium Phosphate (DAP)) production cost is also considered one of the lowest due to is the low cost of ammonia and sulphuric acid, which benefits a host of industries.
Easy access to major importing countries
KSA’s strategic location bestows it with a proximity advantage to end-user markets in major geographies (MENA, Europe and Asia). For example, India, Pakistan and Bangladesh rank respectively #1, #3 and #5 as global importers of DAP fertilizer, all of which are in close proximity to KSA. Opportunities are also available to capitalize on economies of scale for calcium chloride production through large and growing markets in the GCC. Furthermore, strong opportunities exist for the export of sodium chlorate to Asian and MENA importer markets given that they imported a total of 180 kilotons in 2015.
Significant government commitment and support to enable the sector
Saudi Vision 2030 sets a goal for the mining sector to contribute at full potential to the national economy. The development of the mining sector is therefore a priority and is listed as the third pillar of economic diversification after oil, gas and petrochemicals production. Vision 2030’s emphasis on the sector is driven by the expectation that metals and mining are to have a significant beneficial impact on the economy. The mining sector is forecast to increase its GDP contribution to SAR 97 billion (USD 26 billion) by 2020, creating an additional 90,000 jobs in the process.
The Saudi government is conveying considerable support to the mining and metals processing industry through multiple megaprojects. These include a 2,750 Km North–South railway connecting Al-Jalamid mine with processing facilities in Ras-al-Khair Industrial city (RIC), a "world-class metals and minerals city" with integrated industrial complexes, ports and an end-to-end ecosystem. Waa'd Al Shamaal City includes Maaden's phosphate mining expansion and many other large world class facilities allowing for a production capacity of 16 Mt/ year. Additionally, more than SAR 90 billion (USD 25 billion) is being invested in new mining ventures and plants to process industrial ores.
As a result, the mining sector is poised for significant growth in the next few years. The role of the private sector is also set grow, whose participation is viewed by the government as an essential means of optimizing output and developing related downstream industries. Foreign companies looking to invest in the Kingdom’s mining sector should feel buoyed by the recent changes in Saudi Arabia’s mining law as they have created favorable conditions allowing greater access to the sector. More specifically, these changes allow for companies to work either with Saudi’s parastatal ‘Saudi Arabian Mining Co’ (Ma’aden) or through joint ventures with local companies.
Experienced suppliers, contractors and talent pool
Saudi Arabia’s extensive experience in the Oil, Gas and Chemicals industries has enabled the Kingdom to develop a diverse ecosystem that complements several aspects of the mining and metal processing industry. The procurement of machinery and equipment from existing companies provides crucial support to the sector, as do well established maintenance providers with transferrable skills. Companies like SABIC with its 35K+ employees and Maaden with 6K+ offer a large pool of talent from well-established players. Educational institutions like King Fahd University of Petroleum and minerals (KFUPM) and others in the pipeline are also equipped to produce the graduates that are needed to drive this sector forward.
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