Saudi Arabia is pursuing an ambitious industrial transformation under Vision 2030, including efforts to localise heavy industries, expand low-carbon manufacturing and diversify export capacity. Steel demand is expected to grow steadily due to investment in hydrogen, ammonia, shipbuilding, offshore engineering and large-scale infrastructure. However, the country currently imports nearly all of its heavy plate steel, and domestic production has lagged the needs of an economy shifting towards more capital-intensive sectors and cleaner industrial processes.

A new heavy-plate complex developed jointly by China Baowu Steel Group, Saudi Aramco and the Public Investment Fund (PIF) of Saudi Arabia addresses this gap. Announced in May 2023, the facility, which will be Saudi Arabia’s first full process steel plate production plant, will be located in Ras al-Khair Industrial City and is scheduled to begin operations by the end of 2026. With an annual capacity of up to 1.5 million tonnes, the plant will supply domestic industries and export to the wider Gulf and Middle East and North Africa (MENA) region.

A key feature of the project is its low-carbon production route. The plant will use a natural gas-based direct reduced iron (DRI) furnace and an electric arc furnace (EAF), targeting up to 60% lower CO₂ emissions compared with the traditional blast furnace route. The DRI unit is designed to be hydrogen-ready without major equipment changes, enabling emission reductions of up to 90% once low-emissions hydrogen becomes available at scale. This makes the facility one of the region’s earliest examples of hydrogen-compatible industrial development, supporting Saudi Arabia’s ambitions to become a global leader in low emissions hydrogen and sustainable industrial value chains. By localising heavy-plate supply, the project is expected to reduce import dependence, strengthen domestic industrial capabilities and create a platform for exporting low-carbon steel products from the Gulf.

This complex is supported by Saudi Arabia’s Shareek program for large enterprises, which supports large industrial investment projects through financing, expedited approvals, and procurement support.

The project is structured through a joint venture.  BAP Al-Khair Steel Company was established in 2024 with a 50:25:25 shareholding split between Baowu Steel Group, Saudi Aramco and PIF. Baowu initially committed USD 437.5 million for its equity share but later increased its commitment to USD 1 billion, reflecting both the size of the investment and its importance within the company’s international decarbonisation strategy. Aramco and PIF each committed about USD 500 million.

The estimated project cost is around USD 4 billion, with the joint venture expected to pursue a combination of equity and long-tenor project debt. Baowu has already announced plans to provide a financing guarantee of up to over USD 1 billion to support potential loans for the joint venture, signalling strong sponsor backing for what is, in effect, a first-of-its-kind project in the region. Likely lenders include the Saudi Industrial Development Fund (SIDF), CEXIM and other financial institutions. However, details on these arrangements have not been disclosed.

This project marks a significant milestone in the globalisation of China’s low-carbon industrial expertise. China Baowu Steel Group is the world’s largest steel producer with a substantial presence in the industry for low emissions steel technologies. In addition to developing new pilot projects for hydrogen-based DRI in China, it has also committed to cutting its CO₂ emissions by 30% by 2035 from 2020 levels and achieving carbon neutrality by 2050, in line with China’s dual-carbon targets. Extending these technologies abroad demonstrates how Chinese SOEs are beginning to support industrial decarbonisation beyond the power sector, particularly in markets that are building new industrial capacity from the ground up.

The case also highlights a wider shift in China’s outbound investment: from resource-oriented, emissions-intensive international projects towards low emissions, technology-driven industrial assets. Rather than traditional EPC contracting, Baowu is investing as a full equity partner, embedding technical know-how and long-term operational involvement. Partnering with Aramco and PIF reduces early-stage uncertainty and aligns the project with national industrial plans, increasing the likelihood that hydrogen-ready capacity will be deployed at scale.

For EMDE more broadly, the project demonstrates how joint-venture models combining domestic sovereign investors, foreign industrial expertise and policy-aligned financing can help build new low-carbon industrial value chains. Near zero emissions steel, hydrogen-DRI and advanced EAF technologies require large upfront capital and carry technology-transition risks, both of which often deter purely commercial finance. In this case, the ability to blend Chinese SOE capability, Gulf sovereign co-investment and potential policy-bank lending created a pathway that typical private financing would struggle to deliver.