Advancements within heavy industries amidst global sustainability initiatives

Mobility Energy and Transportation

20 Feb 2024

The focus on high-emission sectors like chemicals, metals, and construction materials has intensified, with discussions highlighting the need for Nationally Determined Contributions (NDCs), countries' self-defined national climate pledges under the Paris Agreement. A significant development is the introduction of the Industrial Transition Accelerator, backed by a substantial investment of US$ 30M from key stakeholders.

Climate champions reported collaborative efforts between advanced and developing economies to reshape heavy industries, responsible for one-third of global emissions

Declaration, pledges, and invitations and their potential impact

The push for decarbonization in heavy industries has reached a critical stage, with a focus on electrification, clean hydrogen adoption, and the integration of carbon capture and storage technologies. The recent efforts underscore a global commitment to reducing emissions and accelerating industrial transition. These initiatives aim to decrease energy consumption by 25% to 40%, leading to increased productivity and mitigating 1.3 - 2.3B tons of climate pollution. Corporations are aligning their strategies with environmental sustainability objectives to promote green procurement and combat climate change.

Heavy industries segmentation

Heavy industries encompass large-scale productions characterized by the utilization of extensive machinery, intricate processes, and substantial capital investments. Key sub-sectors in heavy industry activities are chemical manufacturing, metal production, and the fabrication of construction materials.

Chemical industry: Includes manufacturing of acids, bases, alkalis, and salts which are used as raw material for industrial goods manufacturing including glass, rubber, leather, paper, and textiles.
Major metals: Focuses on manufacturing of key base metals, specifically steel, aluminium, and copper, which are the foundational cornerstone for various other industries, providing essential materials for machinery and being indispensable to the overall industrial ecosystem.
Construction materials: Includes manufacturing of essential construction elements like wood, cement, aggregates, timber, hardware, and glass. This sector is integral to the production of fundamental infrastructure components such as concrete, bricks, and insulation materials.

Global and GCC chemical industry

The global chemical industry holds immense significance within the world's economy and supply chain network. This sector is pivotal in the transformation of raw materials into a myriad of products, numbering in the tens of thousands, that play a central role in modern life.

The chemical industry stands as the second-largest manufacturing sector in the Gulf Cooperation Council (GCC). The GCC chemical sector is predominantly export-focused, commanding a 4.3% share of global chemical exports. In 2022, the GCC exported 68.8M tons of chemicals and imported 20M tons, resulting in a favorable trade balance of 48.6M tons, reflecting a noteworthy ~12% year-over-year increase. KSA had a 75% share of the GCC chemical market in 2022.

The chemical industry is subject to diverse demand drivers, including:

Urban development fuels the need for construction materials, coatings, and chemicals related to infrastructure
Technological advancements propel the demand for specialty chemicals used in electronics, materials science, and high-tech applications
Stringent regulations drive the development and adoption of eco-friendly chemicals, fostering demand for sustainable solutions
Evolving consumer preferences for products like cosmetics, personal care items, and specialty chemicals influence industry demand
Increased healthcare awareness and aging populations contribute to the demand for pharmaceuticals and medical chemicals
Growth in the automotive sector stimulates demand for chemicals used in manufacturing, coatings, and vehicle materials

GCC chemical industry investments

In 2021, capital investments in the GCC chemical industry saw a drastic reduction by over half, totaling US$ 4B. Companies, post-pandemic, are strategically rationalizing investments, putting many projects on hold, and prioritizing recovery efforts, while others approach completion. Despite a substantial global decline in investments, the Arabian Gulf region anticipates approximately US$ 61B in planned and committed investments spanning from 2021 to 2025. Notably, GCC chemical producers persisted in allocating funds to environmentally responsible projects aligned with their Environmental, Social, and Governance (ESG) agendas, with a primary focus on energy efficiency and addressing air pollution throughout 2021.

Global metal market and growth drivers

The global metal industry encompasses the production of forged metal components and structural steel fabrication. Projections indicate that the major metals market worldwide is poised to expand from approximately US$ 1.4T in 2022 to around US$ 1.7T by 2028.

Several factors contribute to the growth of the global metal industry, including heightened construction and infrastructure activities, increasing population levels, rising disposable income, and the pivotal role of automation as a key driver for growth and efficiency within the metals sector.

GCC major metals production sale

In 2022, the Gulf Cooperation Council (GCC) recorded a steel production volume of approximately 15.2M tons, reflecting a decrease of 1.2M tons from the previous year. Saudi Arabia emerged as the leading steel manufacturer within the GCC, contributing significantly with a production value of around US$ 1.4B.

In 2022, the Gulf Cooperation Council (GCC) achieved an aluminum production volume of approximately 6.2M tons, marking a notable increase of 0.7M tons compared to the previous year. The United Arab Emirates (UAE) emerged as the leading aluminum producer in the GCC, boasting a production capacity of around 1.6M tons. Following closely, Bahrain and Saudi Arabia contributed significantly with production capacities of approximately ~1.6M tons and ~1M ton, respectively. This underscores the region's prominence in the global aluminum production landscape.

Global and GCC construction material market

The construction materials market encompasses a diverse array of products essential for various building and infrastructure projects. This includes wood products, plywood, laminates, cement, glass, flooring, ceiling materials, pipes, plumbing fittings, paints, coatings, sanitary ware, faucet ware, hardware fittings, electrical appliances, and items related to interior and beautification. These components collectively contribute to the construction and finishing of residential, commercial, and industrial structures.

GCC decarbonizing heavy industries initiatives and targets

GCC countries have announced ambitious energy transition projects, including carbon reduction technologies and hydrogen. The ultimate goal of decarbonization is to achieve carbon neutrality. Gulf countries are taking several measures for decarbonizing heavy industries such as, electrification, replacing thermal driven process, investing in clean power and renewables, and launching wind programs.

Saudi Arabia:Saudi Green Initiative (SGI) aims to reduce carbon emissions by 278M tons per annum by 2030 and have 50% of its power generated from renewable sources by 2030. Saudi Arabia's national oil company, Saudi Aramco, is also committed to reaching net zero operational emissions by 2050.

UAE:UAE's Energy Strategy 2050 targets a 50% share of clean energy in the national energy mix, incorporating a blend of renewable, nuclear, and clean energy sources. ADNOC is dedicated to a 25% reduction in carbon intensity by 2030, coupled with plans to expand carbon capture capacity to 5 million tons by the same year. Additionally, Masdar and Emirates Steel Arkan have outlined a roadmap to slash carbon emissions by 40% by 2030, with a broader goal of achieving net-zero emissions by 2050.

Qatar:Qatar is investing in large-scale Carbon Capture and Storage (CCS) facilities to support decarbonization initiatives and control carbon emissions and plans to store more than 11M tons of CO2 per year by 2035. Qatar's national climate change action plan is to reduce greenhouse gas emissions by 25% by 2030.

Kuwait:Kuwait has several strategic projects to reduce its carbon footprint including promoting clean energy initiatives, introducing new low-carbon technologies, and developing long-term partnerships to exploit sustainable energy opportunities.

Oman:Oman has set a target of achieving net-zero carbon emissions by 2050. This is in line with the Paris Agreement's goal of limiting global warming to 1.5°C. Oman's National Energy Strategy, published in 2020, includes a plan for energy transitions having a target of 20% renewables in total electricity generation and 63% efficiency at gas-fired plants by 2027.

Bahrain:Bahrain aims to reduce emissions by 30% by 2035 through decarbonization and efficiency initiatives. Bahrain Steel invested US$ 250M in decarbonization efforts, including building a roof over the iron ore materials area, establishing a solar energy project, and allocating an industrial land plot.

Plans and steps towards sustainable heavy industries

Leading companies in the heavy industries sector have embraced sustainability and decarbonization through a range of initiatives. This includes the widespread installation of solar panels to generate energy for manufacturing facilities, reducing reliance on conventional energy sources. Additionally, efforts such as the implementation of oxide screen mesh have been adopted to minimize wastage, showcasing a commitment to resource efficiency and environmentally responsible practices. These strategic steps underscore the industry's commitment to reducing its environmental impact and promoting a sustainable future.

What are the impacts and opportunities for key stakeholders ?

Decarbonizing heavy industries offers strategic benefits for stakeholders by enhancing corporate reputation and creating opportunities in the growing green job market. Though initial financial investments may present challenges, a well-executed management approach, including just transitions, extensive education initiatives, and supportive policies, is essential for successfully navigating and capitalizing on the transformative shift towards sustainable practices.