Qatar Steel Stalls $1.34 Billion Project Financing in Credit Crunch

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Researched by Industrial Info Resources (Sugar Land, Texas)--Project developers in the Middle East are accepting the need to give financing some fine-tuning, as corporate borrowing has become more difficult after Wall Street’s subprime fallout. This comes at a time when there is major infrastructure-construction programs going on in the region accompanied by an acute shortage of material resources and skilled people. For details, view related October 9, 2007, article - Contax Identifies Market Signals as Middle East Project Costs Escalate.

Qatar Steel has put off plans to borrow $1.34 billion, which it required to refinance debt and to expand Qatar steel by 1.4 million tons per annum. The company plans to go back to the financial market in January or February 2008. Although Qatar Steel’s parent company is Qatar Petroleum, no guarantee on the steel loan was being offered by the world’s leading exporter of LNG. Qatar Fertilizer is likely to postpone a bond sale from which it was going to finance a chemical plant. Bankers have advised the companies to broaden the spread of lenders for projects loans in order to be able to ride out the credit crunch.

Feeding the construction boom has done no harm to Qatar Steel’s bottom line, which showed a profit of $180.9 million in the first nine months of the year – up 53% for the same period in 2006. This performance was based on the sale of 1.2 million tons of steel over the nine months.

A new steel plant project in Bahrain has the backing of the Japanese company Yamamoto Steel. The company is hopeful that current hurdles will be overcome in negotiations with the local authorities.

The $1.2 billion mill could boost Bahrain’s export total by as much as $2 billion per annum from the base of $11.4 billion in 2006. The project could also create 800 jobs. Reports say that the locally based Arab Banking Corporation will be central to raising project finance.

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