Outlook Improves for Middle East--North African Growth Recovery, Hot Spots Seen in Manufacturing

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Demand for steel in the Middle East--North Africa (MENA) region continues to run well ahead of domestic production, which makes the region a target for global steelmakers.

MENA was affected by the 2008-09 economic downturn, with a marginal reduction in output, but has experienced a recovery in the following years, with the 2013 production output for steel standing at 35% above that of 2007. This increase was driven by production in the Middle East, in contrast to North Africa. The Middle East production figure in 2013 was 59% above that for 2007, compared to a drop of 8% in North Africa.

The single largest driver of the increase was Iran, with an output of 15.4 million tonnes in 2013.

Combined exports of steel mill products (semis, long and flat products, tubes) to the MENA region peaked at 50 million tonnes in 2008, before declining to 42 million tonnes in 2011. Imports increased 6% in 2012, but fell in 2013.

Exports to the Middle East collapsed in 2009, against a background of construction industry problems in the United Arab Emirates (UAE).

Exports to North Africa peaked in 2009 before falling to a low of 9 million tonnes. Increased trade with Egypt and Algeria saw North African imports increase to 12 million tonnes in 2012. This trend continued in 2013, following growth in North Africa.

In 2013, Middle Eastern countries produced 26.3 million tonnes of steel, while production totaled 8.6 million tonnes in North African countries. In 2007, Middle Eastern countries produced 16.5 million tonnes and North African countries produced 9.3 million tonnes, according to the International Steel Statistics Bureau (ISSB) (London, England).

In Algeria, Sonatrach, the $100 billion, state-owned oil and gas company, continued to dominate economic performance. Real growth was estimated at 3% for 2013, driven mainly by domestic demand. Growth of 4.3% is forecast for 2014, followed by 4.2% in 2015.

Algeria's Holding of Public Mines manages 32 mines, 26 quarries and eight processing plants, as well as a range of companies that supply goods and services to the mining industry.

The government is looking to develop the mining industry by exploiting Algeria's advantages of low labor costs, good untapped geological potential, and proximity to Europe. The Algerian resource agency, ORGM, is encouraging investment in Algerian mining. The agency completed aeromagnetic, geophysical and aerial photographic coverage of the country at a scale of 1:50,000, and an estimated $1 billion has been spent on exploration and development during the past few years.

Currently featured in the country's project pipeline are (with IIR project codes): Egypt's growth rate in 2012 was 2.2%, 2.1% in 2013 and is forecast at 2.1% for 2014, and 3.6% in 2015. Major aid from the Gulf countries is allowing the country to target expansionary macroeconomic policies. This is a necessity, with 39% of the population in the 20- to 24-year age group being unemployed.

Steel production in Egypt is estimated to grow 7.22% in 2013 to 7.22 million tonnes, with demand growing 8% to 10.96 million tonnes.

Egypt's mineral resource development is coordinated by the Egypt Geological Mining and Survey Authority (EGMSA). Significant mineral resources are phosphate (the country's main export earner), gold, heavy mineral sands, iron ore and tantalum. There are good prospects for exploration and discovery.

Morocco's gross domestic product (GDP) grew 4.7% in 2013, up from 2.7% in 20/2. Growth in 2014 is estimated at 3.2%, followed by 4.6% in 2015. Morocco has persisted in sectorial strategies parallel to fiscal reforms, which have helped to accelerate the economy's structural transformation and promote new products. New industries, such as aeronautics and automotives, are now drivers of growth and areas of innovation.

Phosphate continues to be a staple of Morocco's mining industry. Copper, cobalt, gold, lead, silver, zinc and fluorite also are mined resources, which will support the country's ambitions as a manufacturer.

The Tanger-Med port, which is less than 10 miles from Europe, is one of the busiest in Africa and will have the capacity to handle 8 million containers annually by 2017. The port is connected by rail and highway to free zones and industrial parks. The port was a key factor in Renault setting up a $1.5 billion auto factory in the country. The factory is connected directly by a rail track to the port.

Following the turmoil of the Arab Spring, Tunisia registered growth of 2.6% in 2013, which was down from 3.7% in 2012. Following the adoption of a new constitution and the formation of a transitional government composed of technocrats, growth is forecast to increase to 3.3% in 2014 and 4.6% in 2015. Phosphates feature in the mining sector.

The country is integrated in the global value chains (GVCs) of three industrial sectors: textiles and clothing; the agricultural industry; and the mechanical, electrical and electronics industries. Exports of automotive and aeronautics components grew at an annual rate of 18% between 2000 and 2012.

The three industrial sectors account for 75% of the country's export firms, and more than 65% of the jobs in industry.

Libya, with an economy and export trade based on hydrocarbons, saw dramatic growth of 104.4%, based on the resumption of hydrocarbon production following the civil war in 2011. In 2013, political volatility and factional strife saw the economy shrink. If the incidents and blockades at oil terminals are subdued, growth of 4.3% is forecast for 2014, and 22.4% for 2015. But if tensions threaten to precipitate more national strife, all bets are off.

For related information, see October 29, 2012, article - Funding and Cost Constraints Could Crimp Middle East -- North Africa's Major Project Plans.

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