Foulath in talks with Kobe Steel to build pellet plants

02 March 2010

Global financial crisis delays Egyptian projects

Bahrain-based metals specialist Foulath is holding discussions with Kobe Steel over directly awarding the Japanese contractor engineering, procurement and construction (EPC) contracts for three iron pelletising plants, according to a senior company official.

Two of the prospective plants are in Egypt with the third located at Salalah, Oman, according to Khalid al-Qadeeri, vice-chairman and managing director of Foulath.

“We are currently in discussions [with Kobe] regarding the plants in Egypt and Oman,” he says. “It will basically be a ‘copy-and-paste’ job from our plant in Bahrain that Kobe did for us recently. We have to decide whether to agree a deal [with Kobe] or put the plants out to tender.”

“The Egypt plants were held up due to the financial crisis, but we are stepping it back up very quickly now due to the increased demand for iron pellets,” he adds.  

The location of the Egyptian plants has not yet been finalised, but the plants will not be built simultaneously.

“We are evaluating a number of different sites and are currently in discussions with the Egyptian government regarding this matter,” says Al-Qadeeri. “There will be a gap of about 12 months in between the construction [of each plant].”

The delay to construction work has benefited the firm as construction costs have decreased considerably during the past 12 months.

“The total price we are looking at now, including finance payments, construction of the storage facilities as well as the EPC is between $650m and $700m for each of the plants,” says Al-Qadeeri.

The three plants will have a similar capacity to the company’s Bahrain facility. It started production on 15 January. The Bahrain plant, once fully operational, will have an output of 6 million tonnes a year (t/y) of iron pellets. These are a vital component in steel production.

“Our capacity for pellets will be just over 9 million tonnes this year, but that will soon rise to 12 million tonnes when the Bahrain plant reaches its full capacity,” says Al-Qadeeri. “The sooner we raise production the better, because we have 13 to 14 million tonnes of demand at the moment and [our pellets] are sold out for the next five years.”

Foulath plans to sell the pellets produced in Bahrain to customers in the Middle East. The plants in Egypt will be used to supply North African and European markets.

The Salalah plant in Oman is a joint venture of Japan’s JFE Steel Corporation and Foulath. Under the terms of the venture, the Japanese company will buy 3.5 million tonnes of pellets from the plant a year. The rest will be sold to Indian and the Far East markets.  

Kuwait’s Gulf Investment Corporation (GIC) owns 50 per cent of Foulath. A further 25 per cent is owned by Qatar Steel, 10 per cent each by the Kharafi Group of Kuwait and the National Industries Group of Kuwait, and 5 per cent by the Kuwait Foundry Company.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications