Middle Eastern Steel Production Expansion Backed by Japan and India

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Researched by Industrial Info Resources (Sugar Land, Texas). Japan’s Kobe Steel (Kobe, Japan) has won the EPC (engineering+construction+procurement) contract to expand the Gulf Industrial Investment Company’s iron ore palletizing plant in Hidd. The expansion of capacity by 6 million tons per annum (mtpa) to 11 mtpa will make the Bahrain plant the principal supplier to the Gulf region’s steel industry.

The Gulf Investment Corporation will be the largest shareholder in the $570 million project and the Arab Banking Corporation (ABC) is the sole underwriter and mandated lead arranger of the debt financing facility, one of the largest ever undertaken in Bahrain. Credit financing will form only 10% of the total project costs. Qatar Steel and three Kuwaiti companies will be strategic investors.

The expanded plant is scheduled to begin operation in the third quarter of 2009 and will provide additional employment to 150 people of which100 will be local Bahrainis. Thirty million dollars of the $400 million annual operating expanses will be spent in Bahrain which will look to maximize employment opportunities by creating a downstream industry for steel production.

Currently only 5 million tons per annum of the 103.5 tons of global demand for pelletized steel comes from the Gulf.

Other steel production ventures in the Middle Eastern/North African region are centered on Egypt where India’s Essar Global (Kodambakkam, Chennai) is studying a $590 million steel plant and has had discussions with local officials. It is expected that an agreement will be signed with the Egyptian government in the near future. In 2006, Egypt became an exporter of steel with 900,000 tons leaving the country out of a total production of 4.3 mtpa.

Tata Steel (Bombay, India) is also studying the feasibility of a $900 million steel plant in Egypt and has been in discussion with the government. Both Essar and Tata have overseas expansion policies. Essar is planning more plants in the Middle East, including a 1.5 mtpa plant in Iran. In North America, Essar has recently acquired Minnesota Steel and Canada’s Algoma Steel. Tata has a ferrochrome plant in Richard’s Bay South Africa and in late 2006 made a successful bid for Corus Steel which was Europe’s second largest steel company with an annual production of 18.2 million tons.

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