The niche that Eastern Province has carved out in the Saudi industrial map reflects its dominance in oil, gas and petrochemicals. These sectors, however, have put into the shadow much of the world-class developments in other industries in the province, such as cement, steel and their downstream sectors. All are energy-intensive and all have been spurred on by the boom in oil, real estate and construction, not only in the Kingdom but also in other GCC states.

Arab News looks at industrial ventures in the traditional sector in the province that rarely get the attention they deserve but which have made a contribution to the Kingdom’s economic progress.

Saudi Cement Consolidates Leadership

Which is the oldest industrial unit in the organized sector in the Kingdom? The answer is: Saudi Cement Company (SCC). Set up in 1955 in Hofuf in the Eastern Province, this joint stock company has become an integral part of Saudi economic transformation. Over the years, SCC has maintained its position as the top player in the building materials manufacturing sector. SCC is the largest cement manufacturer in Saudi Arabia, with its production touching a peak of 5 million tons last year — about one-fifth of the total Saudi cement output. The remaining four-fifths of production is shared by seven other large units in the Kingdom (including the Eastern Province Cement Company, which produced 2.5 million tons of cement last year).

SCC has played a unique role in literally cementing the foundations of Saudi economic development since its product formed part and parcel of most of the infrastructure projects over the years.

SCC has two cement plants, one in Hofuf and the other in Ain Dar, about 35 km apart. The Ain Dar plant, which went into production in 1981 as Saudi-Bahrain Cement, merged with SCC in 1991. Both plants together currently have 10 kilns with a total clinker capacity of 4.15 million tons annually.

The year 2006 has turned out to be a new milestone in the history of the company, with the launch of one of the world’s largest expansion plans in the industry costing SR2.2 billion. Two new production lines are being added to the Hofuf plant increasing capacity by seven million tons a year.

The production range includes ordinary Portland cement (OPC), sulfate-resistant cement (SRC) and oil well cement (OWC). This ISO certified company claims to have one of the “most modern and efficient quality control systems,” the heart of which is the robotic control which facilitates full automation.

With its quantitative and qualitative progress, the company has built up a good reputation abroad and has stepped up exports. In 2002, exports of cement amounted to 1.6 million tons, or more than half of the Saudi cement industry’s total exports. But the export drive had to be slowed down because of buoyant domestic demand. With expansion, SCC is poised to make a major comeback in international markets. It has taken a long-term view of exports and has made ready infrastructure to mount a major export drive. It is probably the only exporter that could think of investing in a jumbo-sized export terminal on its own at the Dammam port, notwithstanding the cyclical nature of cement exports. The export terminal facility it has built in the port has a loading capacity of 800 tons an hour of cement and 700 tons of clinker.

The outlook for the Saudi cement industry is promising because the relatively low cost of energy helps to maintain its competitive strength vis-a-vis foreign competitors. The WTO, which Saudi Arabia joined a year ago, has given a stamp of approval to the pre-existing Saudi pricing formula for feedstocks; thanks to that the industry has vast potential for growth.

More or less the same situation has emerged for the Saudi steel industry, which is also energy-intensive. As a result Eastern Province has had a virtual monopoly of primary steel production in the Kingdom, focussed on two units — SABIC-owned Hadeed, located in Jubail, and that belonging to Al Tuwairqi Group, located in the Dammam 2nd Industrial City.

Hadeed, the Largest Steel Plant in ME

Since coming into being in 1983, Hadeed has become the largest steel plant in the Middle East. It is “one of the largest fully integrated complexes of its kind in the world,” according to SABIC. Total production of long and flat steel of the company has been steadily rising, reaching 3.8 million tons last year. Expansion programs will take that over the 5-million mark by the end of the year and bring Saudi Arabia to the point of steel self-sufficiency.

Hadeed has made some exports, but once again the domestic shortage restricted its overseas market drive. With the expansion projects completed this year and those under way, the company will be able to offer a sizable export surplus in the near future.

Al Tuwairqi Group, Top Steel Producer

New private sector initiatives in steel industry have been few and far between. Al Tuwairqi Group (ATG), Dammam is a notable exception. The company has chalked up an ambitious plan to expand and diversify at home, even as it spreads its wings abroad. Its Al-Ittefaq Steel Products Company (ISPC) can claim to be a private sector leader in the Middle East, being the largest hot rolled steel deformed and plain round rebar manufacturing company. ISPC has an annual production capacity of 1.25 million tons. ATG has been steadily planting the seeds of an integrated steel plant, with its Direct Reduction Iron Company installing 2-DRI modules in Dammam and planning for backward integration into a pellet making plant.

ATG has just launched a SR1.2 billion green-field steel plant project in Dammam, which is expected to go into production in two years’ time. The plant will produce 2 million tons of flat steel. Posco Engineering of South Korea has been given a contract to supply the equipment.

Overseas expansion plans include manufacturing facilities in Sharjah and Dubai at a cost of $800 million. The company has also expanded into Pakistan with a $200-million steel mill in Karachi. Al Tuwairqi hopes to achieve a total steel output target of 3 million tons by 2010.

Saudi Steel Pipe Pumped Up by Oil Sector

In the metallic downstream segment too, the Eastern Province has made major progress, thanks to the buoyant construction market triggered by housing and real estate boom and the roaring demand for oil and gas piping by Saudi Aramco. Demand has been so huge that Aramco has made forward booking for bulk purchases from all reliable domestic steel pipe manufactures.

Those benefiting from this are veteran supplier Saudi Steel Pipes (SSP) and relative newcomer Group Five Saudi Arabia, both located in the Dammam 2nd Industrial City. Both are joint ventures, the former with HU Steel Pipe Company of South Korea and the latter with the Group Five Pipe of South Africa.

SSP was set up in 1980 as a major exercise in import substitution. The Saudi investors in SSP are Rabia & Nasser Company, Al Khorayef Sons Company and Fahd Mohammed Al Saja. The company has today an annual capacity of 160,000 tons of high frequency reduction (HFI) welded pipes. SSP’s latest addition is the plant with a further HFI welded-pipe mill. SSP has a good reputation in foreign markets but, like the cement companies, domestic demand forced it to put its export drive into lower gear.

Group Five Spirals Up

Group Five Pipe Saudi Arabia went on stream in Dammam 2nd Industrial City in 2001. The company’s entry into the market could not have been more timely. This company was established by Adbel Hadi Abdullah Al Qahtani & Sons (Tareq Abdel Hadi Al Qahtani & Bros). The South African partner, Group Five Pipe, is a recognized leader in carbon steel large-diameter spirally welded pipes. The plant began with an annual capacity of 130,000 tons. After testing the market, the company launched an expansion plan to raise annual capacity to 350,000 tons. It is scheduled to be completed this year. Part of production is exported.

Alupco for Aluminum Profiles

With vast deposits of bauxite ready for exploitation and Maaden’s plans for its first aluminum refinery at Ras Azzour, Eastern Province is poised to make a breakthrough in primary aluminum. This will strengthen the existing aluminum extrusion companies and their downstream industries. Among these is Dammam-based Alupco (Aluminum Products Company) One hundred percent Saudi-owned, Alupco’s major shareholders are Hashim Saeed Hashim, Olayan Financing and Badad International. The company, which came into being in 1975, has another plant in Jeddah. The total investment of the company is SR500 million.

The Dammam plant now has a capacity of 30,000 tons of aluminum, the Jeddah plant 35,000 tons. There are expansion plans in the extrusion and surface coating capacity to meet the increasing demand from the architectural and industrial users for fabrication of windows and doors, automobiles, electrical products and furniture. About 70 percent of production is sold in Saudi Arabia, the rest exported.

Textiles Breakthrough

In the mass consumer goods sector, market conditions for the domestic industries are generally not as encouraging as those for industrial raw materials, equipment, or other intermediate products.

Textiles and fisheries, for instance, have established a strong foothold in the province and while competition in these fields from low-cost imports has been too severe for many companies to overcome, some stout-hearted among them have managed to survive with minimum damage. Globalization has only aggravated their threat perception.

Credit for establishing the first organized textile unit goes to Al Ahsa Development Company (ADC). The Saudi-Japanese Textile Company factory, a joint venture with Japan’s Marubeni Corporation, opened in 2002 following the commencement of polyester yarn production by SABIC affiliate Ibn Rushd in Yanbu.

Set up at a cost of SR160 million, the company has an annual capacity of 2.5 million yards of thobe and abaya fabrics. A number of Japanese experts have been helping the factory in its production operations and training of Saudi technical hands. For the year 2006, the factory management, shareholders were told, has prepared a new plan of action, “which will lead with the help of God to achieve profit and diversify the products and improve quality.” The company is also making effective marketing strategies and in-house R&D to improve matters.

ADC also possesses a dates processing and packaging plant started around the same time as the textile factory. It had been making losses but last year showed a turn-round and made profits for the first time, and 2006 is said to be equally promising. ADC in any case has a proud record of earnings in view of its judicious investments in various lines of activity.

Saudi Fisheries Guarantees Fresh Seafood

Saudi Fisheries Company (SFC) represents another leader in a traditional sector. A star performer in the Saudi foodstuffs business with nationwide processing and distribution facilities, it has made a distinguished contribution to the improvement in the food habits of people all over the country.

Set up with a paid-up capital of SR100 million, 40 percent from the government and the rest from private sources, SFC came into existence in 1980 in Dammam to provide a dependable alternative source of quality food. The company, with processing plants and sales outlets in all major cities and a Kingdomwide distribution system with a convoy of refrigerated vehicles, operates 14 modern trawlers in the Gulf and the Red Sea. It has also set up the first major aquaculture shrimp farm on the western coast with capacity to produce 1,500 tons of shrimp a year. It also manufactures a variety of value-added and breaded snack foods.

ChevronPhillips to Repeat History?

Turning from the traditional sector to the downstream hydrocarbon world, Saudi Arabia is now a leader in petrochemical exports. For that, credit has to be given to SABIC, which has a cluster of 17 units in Jubail, all of them world-class and world-size. It has also set up a manufacturing base in Europe and will soon be entering China.

As part of the liberalization policy, investment in petrochemicals was opened to the private sector a decade ago. The first private sector project to enter the field was Saudi ChevronPhillips joint venture petrochemical plant between ChevronPhillips Chemical Company of the US and the Saudi Industrial Investment Group. The plant, located in Jubail and costing $650 million went into production in 2000. ChevronPhillips is now involved in a more ambitious export-oriented project, a $1.2-billion world-scale styrene facility. Currently under construction, it is due on stream in 2008.

Nama Chemicals Seeks New Horizons

Another successful joint venture is the Jubail-based Nama Chemicals (the new name given to the Arabian Industrial Development Co. as part of a corporate streamlining). Nama is a joint stock company established in 1992, with a capital of SR250 million, to promote chemical projects. The capital has since been raised to SR650 million.

The company has developed two chemical plants: the SR111-million Arabian Alkali Company (SODA) and SR300-million Jubail Chemical Company (JANA). SODA produces 50,000 tons a year of caustic soda which has a wide range of applications in almost all types of industries, both in GCC and abroad. It is today one of the largest Middle East producers. JANA, which produces epoxy resins, has annual capacity of 30,000 tons. Nama is currently setting up a third company — Hassad Petrochemicals.

All the enterprises covered here have launched innovative products and processes, shown commitment to quality and technology upgradation and laid out bold plans for progressive increase in their exports.