ArcelorMittal to Build Steel Mill in Iraq

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Researched by Industrial Info Resources (Sugar Land, Texas)--ArcelorMittal (NYSE:MT) (Luxembourg), the world's largest steel producer, has announced plans to set up a steel mill at Sulaimaniyah in Kurdistan, northern Iraq. The steel major will build the facility in a 50:50 partnership with Turkey's Dayen Dis Ticaret Limited Sti (Istanbul). The two companies have signed a preliminary memorandum of understanding.

The estimated cost of the project is between $100 million and $130 million, an amount that will be shared by the two companies. Work on the plant is scheduled to begin in the second quarter of this year. Production is scheduled to start in the fourth quarter of 2011.

The mini-mill will be powered by an electric furnace and will convert locally procured scrap metal into steel rebar. The facility is designed to have an initial production capacity of 250,000 tons per year of rebar. The output will eventually double to 500,000 tons a year. Steel rebar is used widely to reinforce concrete in the construction of buildings. The products from the plant will mainly cater to the needs of the hydrocarbon and construction sectors.

According to Christophe Cornier, a management board member of ArcelorMittal, the company foresees opportunities for more projects in the near future to meet the demand from the booming real estate and hydrocarbon sectors. The demand for steel rebar and sections is projected to be at least 3 million tons per year. The demand far exceeds supply, as the country currently has no steelmaking capacity.

State Company for Iron and Steel (SCIS) (Basra, Iraq), Iraq's only steel-manufacturing facility, was destroyed during the Gulf wars. SCIS stopped production in April 2003. In September 2009, the company announced plans to rehabilitate the plant at a cost of $400 million. The plant's annual production capacity will be increased to 1 million tons each of rebar, sponge iron and billets from its original designed capacity of 440,000 tons of steel per year. In March 2010, SCIS signed a memorandum of understanding with STX Corporation Company Limited (SEO:011810) (Jinhae, South Korea) to construct a 3 million-ton-per-year steel facility and a 500-megawatt power plant at a cost of $3 billion. The integrated facility will be built in Basra.

Iraq is focusing on rebuilding the hydrocarbon industry as part of its reconstruction program. The country recently signed a few multi-billion dollar oil agreements including the $10 billion to $20 billion deal with BP plc (NYSE:BP) (London, England) and China's state-owned China National Petroleum Corporation (Beijing) to develop the Rumaila oil field. In addition, the Iraq Drilling Company (Baghdad, Iraq) plans to drill 180 wells by the end of 2010, which will require an estimated 14,000 tons of steel casing. These huge construction projects are expected to push the demand for steel.

Iraq's real estate sector is also experiencing rapid growth. In September 2009, the government announced plans to construct 3 million homes. There is enough scrap metal available in the country to meet steel demand for at least 10 years. The government is keen on constructing steel plants to put the scrap metal to good use.

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