When one thinks of Saudi Arabia, oil often comes to mind. However, the Kingdom is charting a new course by investing heavily in the mining sector, particularly in metals like nickel, which is crucial for a variety of industries. This strategic move is part of a broader ambition to diversify the economy and reduce reliance on oil, offering lucrative opportunities for international investors.
Unlocking the Mining Potential
Saudi Arabia has earmarked mining as a pivotal sector, rolling out initiatives to boost production of essential metals such as copper, gold, zinc, lithium, and aluminum. Although the Kingdom doesn’t possess significant nickel reserves, its focus has shifted to international investments to secure nickel supply.
In a landmark transaction in 2023, Manara Minerals—a collaboration between Saudi Arabia’s mining giant Ma’aden and the Public Investment Fund—acquired a 10% stake in Vale’s base metals unit, injecting $2.5 billion into the venture. This partnership aims to elevate Vale’s nickel production to over 300,000 tonnes annually, a substantial increase from its current 175,000 tonnes per year.
Driving Industrial Growth
The Kingdom’s Vision 2030 blueprint is set to further escalate nickel demand, with significant investments earmarked for steel plants and electric vehicle (EV) manufacturing facilities. With $6 billion allocated for new steel plate and hot-rolled coil plants, along with an EV battery facility, the demand for nickel is poised to surge. Currently, the steel and battery industries account for over 80% of global nickel consumption.
Fastmarkets analyst Olivier Masson highlights that the stainless steel industry consumes about 66% of all nickel, while 15% is used in batteries—a segment experiencing a rapid growth rate of 12% CAGR compared to a 2% CAGR in stainless steel. This growth trajectory is expected to be even more pronounced in Saudi Arabia.
The Saudi Industrial Development Fund is actively exploring the entire supply chain to bolster EV production. Notably, Lucid Motors has established a car manufacturing plant in Saudi Arabia, aiming to source raw materials and batteries locally. The plant, operational since 2023, has an initial capacity of 5,000 EVs annually, with plans to expand to 155,000 units per year, significantly boosting nickel demand.
Infrastructure Expansion and Its Ripple Effects
Saudi Arabia’s ambitious infrastructure projects, known as “giga-projects,” are set to dramatically increase nickel demand through heightened steel consumption. These projects, each worth hundreds of billions of dollars, include the $500 billion Neom smart city, which will feature a floating industrial complex and a global trading hub powered by renewable energy.
This surge in construction is expected to elevate Saudi construction output by 4.7% in 2024, a significant leap from the modest 0.5% growth in 2023, according to Oxford Economics. However, some caution is advised, as Fastmarkets editor Lee Allen notes that previous forecasts have overestimated steel demand.
Despite these cautious projections, nickel prices have shown resilience, with the London Metal Exchange reporting a 5.39% increase in the three-month nickel contract price in 2024. As Saudi Arabia’s Vision 2030 unfolds, market participants are keenly observing its impact on nickel’s global demand and supply dynamics.
The Kingdom’s forward-thinking approach offers a promising outlook for investors seeking to tap into the burgeoning base metals market. Now is the time to align your business strategy with Saudi Arabia’s transformative vision.
