Slovenian Steel Group (SIJ) has signed a memorandum of understanding with the Saudi Arabian government on its involvement in a €EUR 1.5 billion investment in Saudi Arabia.

Under the agreement, SIJ and its Saudi partner WAHAJ will set up the production of electro steel and premium hot rolled strips in Ras Al-Khair, an industrial city in the southeast of Saudi Arabia.

The agreement was signed last week on the sidelines of Future Minerals Forum by Andrey Zubitskiy, SIJ chairman and majority owner, and Saeed Al Zahrani from the Saudi partner WAHAJ.

Announced by the Slovenian Finance Ministry, the signing was also attended by Minister Klemen Boštjančič and Iztok Seljak, coordinator of the Slovenian automotive industry's green mobility mission (GREMO).

SIJ to provide knowhow

The investment will be largely funded by Saudi Arabia, while SIJ will contribute high-tech solutions and knowhow, the ministry said. SIJ is in 25% ownership of the Slovenian state.

"The starting investment and the majority of the construction will be funded in the framework of a joint venture by Saudi Arabia, which wants to diversify its economy in line with its vision for development until 2030," SIJ said in a statement.

Electro steel is used for the production of key parts of electric vehicles. Electro steel production in Ras Al-Khair is expected to be launched in 2029.

The diversification of the economy means that local industry, including the steel industry, will be set up. Sustainable technologies that are already used by the group would also be implemented, SIJ said.

It is not clear yet what stake SIJ would have in the joint venture because talks are ongoing, SIJ said, while the Finance Ministry said it would be the largest single Slovenian investment abroad to date.

SIJ already generates 5% to 7% of its sales revenue in the region and wants to continue strengthening its presence in Saudi Arabia and neighbouring countries, SIJ said, adding that the project would not affect SIJ's businesses in Slovenia.

Opportunity for Slovenian suppliers

The initiative's coordinator Iztok Seljak told Forbes Slovenija that SIJ's deal was part of the Slovenian supplier industry's efforts for geostrategic diversification in the Middle East.

"The Saudi Arabia sells 800,000 vehicles annually and the entire region 2.5 million vehicles, so this is a large market," he said.

One of the kingdom's strategic goals is to increase the share of electric vehicles, planning to put out 500,000 vehicles a year by 2030 and bring the share of EVs in large cities to 30%.

As foreign car and electronic devices manufacturers are taking on investments and the Saudis are building a supply chain, this is an opportunity for Slovenian suppliers, according to Seljak.

He says SIJ's main rival for the deal was a Chinese company. But SIJ is strong in its niche, being one of only two manufacturers globally that produce electro steel from scrap metal.

The Finance Ministry said that Minister Klemen Boštjančič had facilitated the signing of the memorandum and expressed his support for it during his visit to Saudi Arabia in October.