Al-Rajhi Steel cancels $3bn steel plant

26 May 2013

Bidders informed steel complex will no longer be built at King Abdullah Economic City

The local Al-Rajhi Steel’s planned $3bn steel complex has been officially cancelled and all the potential bidders have been informed in writing.

MEED reported in May that the scheme was in severe difficulty after the company had rejected the commercial and technical bids for the engineering, procurement and construction (EPC) packages.   

The bids were vetoed because they surpassed the budget the company had planned for the complex at King Abdullah Economic City (KAEC) near Jeddah.

“The bidders have been officially informed now and they will all be expecting to receive their bid bonds back,” says a steel source familiar with the deal. “This has been expected by everyone concerned for some months now.”  

The original scope of works for the Al-Rajhi complex included a direct-reduced iron (DRI) plant producing 1.8 million tonnes a year (t/y) of steel, two steel shops produce billets, blooms and slabs, a mill producing long products and a mill producing flat products, as well as a cold-rolling process plant.

Several sources have stated that the major problem with the scheme was the fact that it was being built in one phase. This is an unusual arrangement for a steel plant as it is usually phased with the DRI and steel shop coming first followed by the downstream mills.  

“Many of us are frustrated because we spent a lot of money putting these bids together,” says a source from one of the bidding companies. “There are several bidders who now feel that at least some of the money spent on the bids should be returned.”  

The project was due to be the anchor tenant at KAEC and had been fast-tracked since it secured gas in 2011. Prior to that, progress had been slow due to a lack of feedstock.

The scheme secured a rare gas allocation from the Petroleum and Mineral Resources Ministry on the premise it would be built in one phase and that construction would start by the end of 2012. Finance was also expected to be secured within that time frame.

Al-Rajhi Steel was not available for comment when contacted by MEED..

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