Emirates Steel leaves Jindal with free run at Shadeed

12 May 2010

Indian steel giant on the brink of buying Sohar steel plant after ESI drops out of race

Abu Dhabi’s Emirates Steel Industries (ESI) has dropped out of the race to buy the Shadeed Iron & Steel in Oman, leaving India’s Jindal Group as the sole bidder for the facility owned by Abu Dhabi’s Al-Ghaith Holdings (AGH).

A source close to the deal tells MEED that the facility, located at Sohar Industrial Port in the northern Batinah region of Oman, has been the subject of two rival bids and that Jindal is now on the brink of closing a deal for the 1.5 million tonnes-a-year (t/y) steel plant.   

“ESI is out of the game and only Jindal is left now,” the source says. “I understand the price is in the range of $500m, including liability of a bridge loan of about $120m.”

Planned steel plants in GCC
PlantCapacity (t/y)Country
Shadeed Iron & Steel1.5 millionOman
Hidd Steel Mill4 millionBahrain
Jizan Steel Plant1.5 millionSaudi Arabia
Emirates Steel Phase III1.4 millionAbu Dhabi
t/y=Tonnes a year. Source: MEED

The source adds that while Jindal may be on the verge of capturing a major GCC acquisition it still should be cautious about securing fuel supply from the Oman government. “I think the only worry for Jindal is if they now get the gas allocation for the facility, the source says. “Working in Oman is not as straightforward as other places.”

However, MEED reported last month that a source had allayed previous concerns about a company from outside the GCC region struggling to secure a gas allocation for the facility after reassurances from the Oman government.  

When contacted by MEED, ESI did not confirm or deny that it was no longer pursuing Shadeed.

“ESI’s plans for further growth include potential greenfield investment opportunities and acquisitions. However, ESI is still committed to a capital investment of $2.45bn in its phase I and phase II expansion projects,” the company said.  

Meanwhile a quick sale will be welcomed by Shadeed employees after claims by staff working at the facility that salaries are not being paid on time by AGH and commissioning that was supposed to have started in the first quarter of 2010 will not now start until early 2011.

“Commissioning may be next year in January or February. I have been told that it will not be this year due to financial difficulties,” a source says. “[Not]everybody is getting their salaries and we are being told that this is also due to financial difficulties.”

Another industry source confirms that commissioning has not yet started at Shadeed.

“The plant is missing some parts and is still not working,” the source says. “The owner must not be worried about losing money while the plant sits idle.”  

AGH were not available for comment when contacted by phone and email by MEED.

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