How will Saudia Arabia’s ‘Vision 2030’ boost nickel demand and unlock investment in supply?

The Kingdom of Saudi Arabia’s (KSA) ambitious plan to diversify away from oil and into metals will increase local nickel consumption and fund international mining projects, given recent massive investments in nickel-intense industries

Saudi Arabia has identified mining as a key industry and announced several initiatives in recent years to boost – or begin – production of copper, gold, zinc, lithium and aluminium.

Saudi Arabia is not believed to hold major nickel reserves, and its current exploration efforts are focused on gold, copper and zinc. As a result, Saudi Arabia is investing in international nickel supply.

In 2023, Manara Minerals – a joint venture between Saudi miner Ma’aden and Saudi Arabia’s Public Investment Fund – bought a 10% stake in Vale’s base metals unit for $2.5 billion.

Vale expects the extra investment from the partnership to help increase its nickel production to more than 300,000 tonnes per year, up from its current level of 175,000 tpy.

Downstream

Vision 2030 could also boost nickel demand. Saudi Arabia has announced multibillion-dollar investment plans for new steel plants and electric vehicle (EV) factories. This includes $6 billion for the construction of new steel plate and hot-rolled coil plants, and an EV battery plant, announced in 2022.

That will increase demand for nickel as the two industries are responsible for more than 80% of demand for the metal. According to Fastmarkets analyst Olivier Masson, approximately 66% of all nickel is consumed by the stainless steel industry, while 15% goes into batteries.

It is the latter segment that is growing more quickly. “The global stainless steel industry’s demand for nickel has a compound annual growth rate (CAGR) of 2%, while the amount of nickel used for batteries has a CAGR of 12%,” Masson said. “Combined they are causing global nickel demand to grow at a CAGR of 4%.”

Yet in Saudia Arabia those figures could one day be even higher.

“The Saudi Industrial Development Fund is looking all the way through the supply chain and wants to develop EV production,” Fastmarkets special correspondent Andrea Hotter said

“Lucid [an EV manufacturer] has opened a car plant there, for example, with the aim of eventually securing the raw materials and the batteries from new producers based in KSA,” Hotter said. “Saudi Arabia has also launched its own EV company called Ceer.”

Lucid’s plant in Saudi Arabia opened in 2023 and has the capacity to build 5,000 EVs per year, according to its website. But that will eventually grow to 155,000 units per year – all of which will boost nickel demand.

To give that number some context, the International Energy Agency estimates that 14 million EVs were sold last year, taking the total number on the road to 40 million.

But the largest boost to Saudi nickel demand will come from steel used in its infrastructure expansion. The country has launched a series of so-called “giga-projects” that are worth hundreds of billions of dollars each and are expected to boost Saudi steel consumption.

For example, Turkish steelmaker Kocaer Steel this year announced plans for a steel factory in Saudi Arabia to supply the country’s $500billion Neom smart city project. The new city would have a floating industrial complex, global trading hub and public transport powered by renewable energy.

As a result, Oxford Economics forecasts that Saudi construction output, which is a key factor in steel demand and therefore nickel consumption, will grow by 4.7% in 2024. This is a big jump from the paltry 0.5% growth recorded in 2023.

Yet such figures should be taken with “a pinch of salt”, according to Fastmarkets strategic markets editor for scrap Lee Allen, who noted that Oxford Economics’ 2023 forecast overestimated Saudi steel demand.

Allen interviewed several local steel sources in Saudi Arabia who revealed they have yet to see a serious uptick in steel consumption.

“News of glitzy gigaprojects that would require enormous volumes of steel – such as The Line, Trojena and The Red Sea – have been in headlines across global media,” Allen said. “But the near-term reality being felt by mills in the country is still rather different.”

So far nickel has made small gains in 2024. The London Metal Exchange three-month nickel contract closed at $17,467 per tonne on Monday June 17, up 5.39% from $16,574 per tonne on January 2.

Market participants will be keeping a close eye to see how the development of Saudia Arabia’s Vision 2030 changes nickel’s demand and supply.

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