Oil and gas give Saudi Arabia an extraordinary competitive advantage, but the kingdom needs to take various steps to ensure this is exploited to its benefit, says Tenaris chairman and chief executive Paolo Rocca.

“The challenge is to build around this competitive advantage on the value chain of industrial development,” Rocca said at the first Saudi International Iron & Steel Conference in Riyadh attended by Kallanish.

Saudi consumes around 2 million tonnes/year of pipe. In developed countries industry produces 30% of overall GDP, whereas in Saudi it is 12-13%. This shows the Saudi value chain has a very high potential for development. It should be “… state policy” to develop industry, Rocca commented.

Global steel overcapacity is denting the willingness of investors to develop new capacity, including in Saudi Arabia. The kingdom has an opportunity during its G20 presidency to focus on tackling overcapacity and promote local content, he continued.

Saudi should consider an anti-dumping duty to protect local industry from unfair competition, as well as some programmes for local content. This, in combination with the in-Kingdom Total Value Add (IKTVA) programme, would attract value-added investment in the supply chain.

There are three main things Saudi authorities can do to encourage foreign steel investors, according to Rocca. The first is to establish regulations for local content use, such as in the new USMCA trade agreement which stipulates 75% of automotive content be made in North America. The Gulf Cooperation Council should also adopt an integrated approach, allowing Saudi producers to raise exports to other countries in the bloc. Kuwait, for example, could increase its pipe intake from the kingdom.

Lastly, there must be support for education to encourage young Saudi engineers to go into the steel industry. “You see a country that has human resources – this is important from the point of view of investment,” Rocca concluded.