A local foundry industry for Saudi Arabia

Saudi Arabia

Abdulrahman Algosaibi, chairman of Specialized Industrial Casting Company (SICAST), talks to The Energy Year about the drivers behind the company’s investment to set up a foundry producing steel casting components mainly for valves and pumps in Saudi Arabia. SICAST is a 100% Saudi-owned enterprise with shareholders from well-established names in Saudi Arabia.

What are the benefits of having a foundry making castings for valves in Saudi Arabia?
Casting is a foundational industry in any country. Every country must have some basic casting capacity, and this will impact the competitiveness of its oil and gas, petrochemical, defence, cement, mining and transport industries, to name just a few.
The kingdom’s low energy costs, strong labour force and solid infrastructure provide a competitive environment not only for supplying the local market but also for placing products on the international market, including the European markets, considering that foundries are energy intensive.
Today, most valve manufacturing happens outside the kingdom, but incentivised by Aramco, the OEMs are setting up operations here. To complete the localisation efforts, they will procure casts locally, and as they start assembling them here, the demand for locally manufactured valve castings will increase. Valves are a critical piece of equipment.

What were the main business drivers behind the decision to enter the foundry business?
Looking at the valve market, which is a large segment of the overall market we’re targeting, we decided to invest in a foundry with a capacity of 16,000 tonnes per year, which is a quantity meant to feed the local supply chain and leave an approximate 15% of products for export.
It was a complex decision because we’re far removed from the end user. We will produce a cast that will then be used to build a pump or a valve that will be sold to an EPC contractor, who will then install it as part of a turnkey project for Aramco, SABIC or the SWCC [Saline Water Conversion Corporation].
We believe very strongly in the In-Kingdom Total Value Add programme. When we started, the programme was still in its initial phase, but we knew that the future was in-kingdom manufacturing, so we invested ahead of time, targeting the high end of the market and so staying away from the more competitive low-tier high-volume producers, most of which are based in India and China.

Please describe the dimensions and capabilities of the upcoming casting facility.
We are a fully Saudi-owned company, and we receive financial support from the Saudi Industrial Development Fund, which has provided an investment of around SAR 450 million [USD 120 million]. The facility is on 85,000 square metres of land located in the Sudair Industrial City. With phase one we will be able to cast single pieces of up to 1.2 tonnes, and the moulding setup is called fast loop. This means we can do 10 moulds per hour. In phase two we will go into floor moulding, where we can cast 10-12 tonnes in a single piece.
I don’t think that there is any other foundry in Saudi Arabia with the type of equipment that we have or the technology that we’re planning to deploy. I don’t believe high alloy castings for valve parts are produced today in the kingdom. Most foundries here work with iron or basic steel rather than complex and exotic alloys. We will go through all the materials: from carbon steels to more complex alloys, such as stainless steels, duplex and super duplex, nickel and many others.

What type of investments have you made to reduce the foundry’s carbon footprint?
Our source material is scrap, so our melting feedstock comes from recycling. In some European foundries, they buy the scrap that’s put into billets that already match the required alloy. By contrast, with the technology we have, we will be able to produce the alloy out of basic scrap.
We’ll be able to utilise more scrap than other foundries because of the investment that we put into the refining process of the scrap metals. We treat carbon steel from scrap through an oxidisation and decarbonisation process. This will enable us to make the alloys from a much wider range of scrap.
Moreover, as furnaces are all electrically driven, power supply has a significant role in a foundry’s CO2 footprint. In the Sudair industrial area, we are very near the 1.5-GW Sudair solar power project currently under construction, so eventually our electricity will be green.
Finally, we’re doing sand casting, and we have invested in a process to mechanically remove the chemicals from used sand. Through thermal reclamation we will reuse the sand. It’s quite a clean operation.

What segments of the energy value chain are you targeting in the initial phase?
We aligned with Aramco and will initially target the oil and gas midstream and downstream sectors. There is also a lot of potential with SABIC and the Saline Water Conversion Corporation, as well as Ma’aden as end users of our products. A natural expansion would be for SICAST to move into forging to provide a complete solution for oil and gas service providers that typically prefer to have a single supplier of valve parts.

What are the main challenges in developing a healthy national foundry industry?
The classification of different imported casting parts and materials is a potential challenge. Sometimes customers don’t understand the difference between the cheap castings coming from China and high-quality castings that are available from other countries or the ones we’re planning to produce here. We’re working with SASO, the Saudi Arabian Standards Authority, to develop standards to classify the different qualities.
Fluctuations in steel prices will always be challenging. Another challenge concerns training and retaining a workforce in the kingdom. The foundry industry in general is known for its high turnover rate.

How would you describe Saudi Arabia’s progress in the last few years?
One of the things that people might not realise is how far the mega-projects have come. People don’t realise that the first island in NEOM is opening at the end of 2023. The first phase of The Line city is already being constructed, and the excavations are happening. The developments we were talking about three or four years ago are actually becoming a reality.

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