Saudi Arabia’s Ferrous Scrap and Wastes Market Outlook Report

Product Description

With a GDP of over $793 billion in 2019, Saudi Arabia was the largest economy in the region that year. The country’s economy, the second richest country in terms of natural resources, is heavily dependent on oil, its main natural resource. But since the introduction of the 2030 Vision in 2016, the country has determined to minimize oil reliance. Saudi Arabia is the third largest producer of crude steel in the region, behind Turkey and Iran. Owing to the abundant availability of natural gas, steelmakers use direct reduction in EFs to produce steel. However, with the increasing volume of ferrous scrap in the Arab states of the Persian Gulf, the share of scrap in the country’s steelmaking feed has increased.

Market drivers of Saudi Arabia’s ferrous scrap

Securing raw materials, especially iron ore pellets, for the production of sponge iron (which will then be melted to produce steel) is one of the most important issues in Saudi Arabia’s steel industry. The country’s existing capacities are almost enough to meet a large part of steelmakers’ demand for raw materials, but due to the tight availability of pellets, some sponge iron capacities have remained idle. Especially over the recent years as global iron ore and pellet prices have climbed, the issue has been more evident, prompting steelmakers to use alternative materials such as scrap. Since the country’s domestic iron ore supply is expected to remain unchanged over the coming years, most of the growth in steel output will come from higher supply and consumption of scrap.

Based on the Saudi Vision 2030 and the country’s plans to expand the share of manufacturing in the total GDP, the per-capita consumption of steel is expected to increase along with industrial development. As steel demand improves, steel output will also increase and the scrap market will grow. It should be mentioned that the manufacturing sector’s contribution to the total GPD has increased from 11% to 13% over the past years.

Saudi Arabia reported the first case of Covid-19 in early March 2020. Lockdown measures were then implemented, leading to a 70% drop in the country’s mobility index. As the pandemic continued to spread across the country, more strict measures were taken, putting further pressure on the mobility index. The country is now past the first wave of Covid-19, but many are still forecasting worse to come in the coming months. This can weaken both demand and supply of scrap.

Overview of Saudi Arabia’s ferrous scrap market

Saudi Arabia’s supply of scrap has increased significantly over the recent years. The growth of scrap yards and higher scrapping rates combined with the increased construction in the country are the major drivers of ferrous scrap supply over the recent years. It should be mentioned that the steelmakers’ move towards using scrap following the difficulties of securing iron ore pellets and concentrate are also important factors in the growth of the scrap market. Saudi Arabia’s ferrous scrap supply grew at such a rate that despite growing demand, the market was still undersupplied. However, the downtrend in the supply deficit is not likely to continue. Higher output of secondary steel, which will lead to stronger scrap demand, is expected to result in increasing net imports.

Breakdown of Saudi Arabia’s ferrous scrap market

Saudi Arabia’s ferrous scrap market can be broken down using three factors. In the first breakdown, ferrous scrap falls into old and new scrap based on origin; scrap produced during fabrication is called new scrap, while scrap from end-of-life goods is known as old scrap. The second factor divides ferrous scrap into heavy melting scrap, light-weight scrap, black sheet, busheling, and turnings. Finally, in the third breakdown, ferrous scrap is categorized based on its applications and consumers, including producers of crude steel, ferroalloys, and cast parts.

Key players in Saudi Arabia’s ferrous scrap market:

• Al-Ittefaq Group
• National Steel Co.
• Saudi Iron and Steel Co. (Hadeed)