Aug. 25, 2015


Mahdi Nasser Al-Qahtani

Saudi Arabia

Mahdi Nasser Al-Qahtani

Board Member and CEO, Rajhi Steel

TBY talks to Mahdi Nasser Al-Qahtani, Board Member and CEO of Rajhi Steel, on supporting domestic industry, lifting the steel export ban, and longer-term plans for the future.

BIO

Mahdi Nasser Al–Qahtani is a board member of Rajhi Steel and the CEO. In addition, he is a board member of Al Jazirah and Falcon industrial companies. Since June 1982, he has assumed several leading posts including Director of Maintenance at Kemya, an affiliate of SABIC, a JV with ExxonMobil, then UNICOIL Operations Manager. He has 33 years of experience in the industrial sector.

Rajhi Steel is the largest private steel company in the country. What is the role you play in the heavy industry's domestic private sector development?

Mohammad Abdulaziz Al Rajhi founded Rajhi Steel in 1984. The company started off as a small production plant in Riyadh. Today, it produces over 3.5 million tons of steel bound to meet the demand of the construction sector. Rajhi Steel produces up to 0.9 million tons of steel per annum from its Kharj industrial complex and about 2.6 million tons from its industrial complex at Jeddah. Our largest clients are government contractors, and 80% of our output is used to supply government projects. We are committed to the socio-economic development of the country and our long-term strategy is to ensure the competitiveness of Saudi steel across the MENA region. An example of our commitment to Saudi development is our investment in local talent. Currently, the sector relies heavily on the expertise of highly-skilled immigrants to operate the plants. Nonetheless, we are dedicated to the education and training of Saudi citizens and we are proud of our Saudi workforce. In partnership with the Saudi Standards Metrology and Quality Organization (SASO), we at Rajhi Steel are improving the sector in many ways, on par with those of the US and UK. To ensure that Saudi Arabia continues to remain attractive to foreign investors, we need to have a qualified workforce, high quality standards, and efficient legislation.

The budget for the government's construction megaprojects correlates with the state's oil revenue. What impact does the price of oil have on supply-chain management?

We believe that the drop in oil prices will not have a significant impact on the Saudi Arabian economy. Despite the oil price decrease, steel demand has not declined. The portfolio of Saudi construction projects for 2015 is worth at least $13.59 billion. Rajhi Steel has shown strong and steady growth since its inception, with a CAGR of 22% over the past three years. We expect that to continue, and are confident that, in accordance with the country's plans to continue investing in infrastructure, demand for steel will continue to grow.

How is Rajhi Steel expanding its manufacturing capacity?

Rajhi Steel had successfully expanded its rebar production capacity by 1 million tons by 2012. Our two new downstream specialty plants produce over 100,000 tons of cut and bend or custom-shaped steel, and we plan to inject more capital into these plants in the future. We currently produce high-quality steel to meet the short-term demand for the Kingdom. The steel bars we produce range from 5.5-40mm in diameter, and up to 12m in length. Each bundle weights 2 tons. Coil diameter ranges between 5.5-16mm, and coil weight is either 1.8 or 2.4 tons depending on the type of alloys used. In the long run, we hope to diversify our production. We are in the market for new production technologies that will enable us to be cost effective.

If the government lifted the export ban on steel, what countries would become feasible markets for Rajhi Steel?

During the global downturn in 2008, there was a shortage of heavy material in the local market. At the time, the government launched a law banning exports. Now that there is no longer a shortage, the export ban is being lifted. We are working with other steel manufacturers to try to get the ban lifted by the end of the year. In the long-run, we are interested in expanding into regional and African markets.

What's your long-term vision for Rajhi Steel?

Rajhi Steel is looking to invest in both back-integrated and forward-integrated plants to increase its competitiveness. With regard to the country's steel sector, according to our projections, demand levels will continue at the same rate for the next five to six years at least, without foreseeable problems. We are looking for new opportunities in the region, such as trade liberalization, as well as potential threats like the development of international steel producers in Turkey or Ukraine. We hope the government will consider applying appropriate legislations. The steel industry plays an important role in the diversification of the country's economy away from the oil and gas sector, and should be encouraged using a fair import and export tax regime. We believe that demand for steel in Saudi Arabia is going to be steady for the rest of the year, and we also expect stability in the costs of raw materials.

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