The largest South Korean metallurgical company POSCO has signed an agreement with the world's largest oil company Saudi Aramco to build an integrated steel mill in Saudi Arabia for the production of sheet metal.
A Korean steelmaker will undertake a feasibility study for the commercial viability of a steel sheet project, which will supply products primarily to the fast-growing oil and gas industry.
Today, Saudi Arabia does not have a heavy plate plant, which means that all of its domestic needs are met through imports. However, the economic feasibility of the project is still in doubt, mainly due to demand problems. The country only accounts for about 14% of the total demand for steel sheet in the Middle East and Africa region.
This is not the country's first attempt to build a metallurgical plant. Earlier in 2018, a memorandum of understanding was signed with Nippon Steel and Sumitomo Metal Corporation (NSSMC) to conduct a feasibility study. In addition, Sabic Hadeed, the largest steel producer in the country, planned to build a 1.5 million tonnes a year plate mill, but was later abandoned due to falling oil prices and continuing weakness in the steel market. </P >
Saudi Arabia is actively pursuing its Vision 2030 strategy, which provides a strategic framework for reducing dependence on oil and diversifying the economy.
Key aspects for a potential plant will be steelmaking technology, product range and subsequent applications. Will the new plant target the exclusively oil and gas sector? In such a case, the viability of the project will depend on a wide range of factors such as classification, market niche, competition and the future flow of future energy projects in the region.
It is pertinent to note that Iran is the leading producer and consumer of sheet metal for reversing rolling mills in the region. Iran can fill the gap between supply and demand given its excess supply of slabs. US-Iranian relations are now expected to improve under President-elect Joe Biden. He has already indicated that he wants to join the nuclear deal with Iran and lift sanctions if Iran abides by the nuclear deal with the West. Steel exports from Iran increased significantly when the Obama administration lifted sanctions in 2015.