SAUDI ARABIA'S ECONOMY AND THE EXPECTED DEMAND FOR STEEL IN Dec 2015 Abdullah S. Al-Zahrani Business Analyst -Strategy Metal SBU

Transcription

1 SAUDI ARABIA'S ECONOMY AND THE EXPECTED DEMAND FOR STEEL IN Dec 215 Abdullah S. Al-Zahrani Business Analyst -Strategy Metal SBU

2 CONTENT 1. Overview of SABIC 2. Overview of the KSA Economy o Non-Oil Sector o Oil Sector o construction 3. Economic Outlook 225 o Oil Price Impact o Demographic Outlook o Construction Outlook 4. Steel Demand Forecast No. 1

3 OVERVIEW OF SABIC

4 WE ARE SABIC We are one of the world s leading manufacturers of chemicals, plastics, agrinutrients, and metals. Since our founding in 1976, we have achieved rapid global growth. We now operate in more than 5 countries, with more than 4, employees around the world. We provide innovative material solutions that help our customers change the world for good. No. 3

5 SABIC IN NUMBERS 1976, our beginning 39 years of growth 3rd largest global diversified chemical company 116th largest public company in the world 91 B$ total assets 5 B$ annual revenue 6.2 B$ net income 4, employees 5 countries 5 Strategic Business Units 64 world-class plants worldwide 5 key geographies with innovation hubs 15 new products each year 1,64 global patent filings No. 4

6 OVERVIEW OF THE KSA ECONOMY

7 THE KINGDOM OF SAUDI ARABIA (KSA) IN WORLD AND IN MENA KSA is the largest economy in the MENA region. KSA is the world s second largest producer and exporter of oil, and plays a central role in global oil markets. It has experienced high growth over the last decade thanks to the commodities boom and the country s efforts to diversify its economy. KSA on the map of the World Indicators for the year 214 KSA % of world % of MENA Rank in MENA GDP (billion US$) % 21.9% 1 Population (million) 3.8.3% 6.7% 6 KSA on the map of MENA Per capita GDP (th US$) % 344% 5 Oil production (mbpd) % 36.2% 1 ASU (Mt) % 2.% 2 Crude steel production (Mt) 6.3.4% 17.% 3 Source: Global Insight for GDP and population, worldsteel for ASU and csp, IEA for oil production No. 6

8 The KSA Economy Real GDP Growth KSA Real GDP Growth, annual percent change Oil-dependent Transforming the economy by reforms & investment 5. Pre-crisis boom period Global fin.. crisis Volatile, oil price driven growth Asian crisis During oil-dependent era budgetary spending, which was funded by oil and gas revenues, oil sector growth was the main contributor to growth. Growth was very volatile. Since 2 the KSA has adopted a development strategy to transform its economy, implemented market-friendly reforms to encourage private-sector participation. KSA s development strategy has resulted in a marked improvement in economic performance. Source: HAVER, Global Insight No. 7

9 NON-OIL SECTOR GROWTH Real output growth, Sector shares in real GDP 3% Oil sector Nonoil sector 25% Private sector Government sector 2% 15% 1% 5% % 199-5% % 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% Oil sector Private sector Government sector % Non-oil sector growth accelerated significantly after 2, averaging over 7.% annually. Oil sector growth averaged to 1.5% per annum since 2. Non-oil sector has been playing an important role as a driver of economic growth in the KSA. Source: HAVER, CDIS No. 8

10 A CLOSER LOOK TO THE NON-OIL SECTOR Real GDP by sectors (199=1) CAGR by sectors, & , 5 oil manufacturing construction trade transport&communications Finance, insurance & business services Oil 2.1% 1.3% Manufacturing 5.% 7.3% Construction 2.9% 7.3% Trade 4.3% 1.3% Transport & comm. 3.8% 12.9% Finance & business serv. 1.7% 7.1% KSA Real GDP 2.8% 5.5% KSA real GDP growth rate increased from 2.8 % to 5.5% Real output in non-oil sector has grown on average by 7.5%, during vs. 1.3% in oil sector. Source: National Bureau of Statistics, HAVER No. 9

11 EXPORT DIVERSIFICATION Exports (excluding re-exports), Bil. Riyals Exports Oil & Non-oil, 214 1,6 1,4 1,2 1, Oil Non-oil 8 6 Non-oil 14% 4 2 Oil 86% KSA s non-oil exports have increased from 7% of the country s total exports in 199s to 14% in 213. Source: National Bureau of Statistics, HAVER No. 1

12 KSA IN GLOBAL OIL MARKET Global oil reserves 214, billions of barrels Global crude oil production, millions of barrels per day Saudi Arabia North America 8 Central & South America Europe 7 Eurasia Rest of Middle East 6 Africa Asia & Oceania VEN KSA CAN Iran Iraq KuwaitUAE RUS Libya NGR USA KZK Saudi Arabia is one of the world s largest producers and exporters of oil KSA has a spare production capacity of over 2 mbpd KSA crude oil production & exports, mbpd Crude oil production Crude oil exports Source: US Energy Information Administration No. 11

13 OVERVIEW OF CONSTRUCTION SECTOR Real construction output, billion 21 Riyals Construction output real Growth rate The Kingdom s construction sector grew 7.2% on average every year since 23 As a share of real GDP construction accounted for around 5.% of the KSA GDP. Source: SAMA, HAVER No. 12

14 NON-RESIDENTIAL CONSTRUCTION ACTIVITY Residential & non-residential construction output, billion 21 Riyals Residential Share residential Non-residential 6% 5% 4% 3% 2% 1% Source: Global Insight and worldsteel estimates % Residential and non-residential construction used to represent about equal shares of construction activity in early 2s Non-residential construction have increased its share since then and now estimated to represent about 7% of all construction activity in the Kingdom. Source: Global Insight, National Bureau of Statistics, HAVER No. 13

15 RESIDENTIAL BUILDING ACTIVITY Residential construction output, Bil. Riyals Residential construction activity is motivated by the growing requirements & changing preferences of a rapidly growing population. Average residential construction activity was about 3% in higher than the average for 2-27 No. 14

16 INFRASTRUCTURE CONSTRUCTION ACTIVITY Infrastructure industry value and share of construction, Billion riyals and % 57% Infrastructure industry value Share of construction 56% 55% 54% 53% 52% 51% 5% Provisional budget expenditure on infrastructure*, Billion riyals KSA government s infrastructure expenditure grew by about 18% on average since 24 and hit SAR 86.5 bn in 214, reflecting the Kingdom s efforts towards diversifying its economy by investing heavily in infrastructure Current projects that are in focus include rail and road projects, airport construction & upgrades, construction of six economic cities and expansion of industrial cities of Jubail, Yanbu and Ras al Khair No. 15

17 ECONOMIC OUTLOOK 225

18 OIL PRICE IMPACT Global oil market environment has changed substantially with oil prices dropping by more than 5% The decline in oil prices is resulting in substantially lower export and fiscal revenues Government spending will need to adjust to the lower oil price environment. Sustaining the current level of expenditure would lead to a deficit over High accumulated reserves and low government debt support KSA to manage possible deficit No. 17

19 POPULATION OUTLOOK Total population (millions) 4 Saudi migrant share migrant % 3% 25% 2% 15% 1% 5% % Population growth rates, % 18% Saudi Immigrant total 16% 14% 12% 1% 8% 6% 4% 2% % KSA population expected to continue growing with gradually slowing rates Total pupulation expected to reach 36.8 mn in 225 from 31.5 mn in 215, representing a 1.6% average growth rate over No. 18

20 WORKING AGE POPULATION OUTLOOK Population by broad age groups, % Dependency ratio for different regions, % Dependency ratio Northern Africa WORLD India Saudi Arabia United States of America The working age population (15-64) is estimated to represent more than 65% of the population currently, The dependency ratio for the country (the share of child and elderly to working age population) is one of the lowest in the world. No. 19

21 CONSTRUCTION SECTOR OUTLOOK TO 225 KSA Construction activity, annual percent change 2% Construction Residential Non-residential Infrastructure 15% 1% 5% % CAGR, & Construction 7.2% 3.8% GDP 5.5% 4.2% No. 2

22 STEEL DEMAND FORECAST

23 SHARE OF STEEL USING SECTORS Share of steel using sectors Sector % Fabricated Metal products 1.27% Electrical equipment.39% Mechanical equipment.% Automotive.18% Other transport.% Appliances.28% Manufacturing 2.84% Construction 95.4% KSA 1% Constructions sector represents the major share of steel demand which anticipated to decrease in the future as government initiative projects in the downstream industry start which will require steel like Auto Steel and Plate No. 22

24 225 STEEL DEMAND FORECAST % % 5 Steel Demand is mainly coming from construction. It might be reasonable to expect a slightly lower steel intensity for the construction activity, particularly for the period beyond 22, as the composition of the construction activity is expected to change due to the growth projected for the non- residential sector and a moderate growth only for the infrastructure sector. No. 23

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