The regional steel industry is going through something of a purple patch. With more than $1 trillion worth of construction projects planned or under way in the GCC alone, demand for steel products has grown to unprecedented levels. And with oil prices set to remain above $50 a barrel for the foreseeable future, producers are confident that the good times will remain for some time to come.
Saudi Iron & Steel Company (Hadeed) is in the thick of the action. The wholly-owned subsidiary of Saudi Basic Industries Corporation (Sabic) is the Gulfs largest steel producer, with capacity of more than 3.3 million tonnes a year (t/y) of long products and 2.2 million t/y of flat products. And it is looking to become considerably bigger, with plans being prepared to double production capacity to more than 10 million t/y by 2015.'Our capacity increase will be via greenfield projects, joint ventures and mergers and acquisitions,' says Hadeed commercial general manager Hisham Abdullatif al-Hmili. 'We want to diversify our product slate and concentrate on value-added products.'The expansion plans are a measure of how far the Jubail-based firm has come. Established in 1983, the company focused on the production of billets and direct reduction iron (DRI) production until 2000 when it started producing slabs. Now employing 3,000 people, it plans to be the pre-eminent steel producer in the Middle East.Strong demandThe economic boom has ensured that demand for steel products has outstripped supply. For example, the GCC produces 7 million t/y of steel reinforcement bar (rebar), which falls short of local demand of more than 9 million t/y. And while more capacity is set to come on stream, Hadeed is confident that the right economic conditions are in place to keep demand high.'A strong fiscal stimulus, mega projects everywhere, an inward bias to spending and investment and the deepening of financial markets are all factors which we think will stimulate demand,' says Al-Hmili.'On top of that, macroeconomic reform and liberalisation and stock market performance favour future growth.'The company believes it is particularly well placed to take advantage of the situation. It has a fully-integrated facility with five DRI modules and an equal number of electric arc furnaces. Eight production lines including bar and rod mills, a hot strip mill and galvanising and colour coating lines produce a diversified product mix.This will be diversified further by Hadeeds current expansion round, due to be completed soon. The expansion includes a sixth DRI module, a third steel slab plant with capacity of 1.2 million t/y and a 500,000-t/y steel vacuum degasser to produce sour grade steel.'The pipe industry is our main target with this current expansion,' says Al-Hmili. 'Were just bombarded by projects at the moment from both the public and private sectors. More than 80 per cent of our sales will be to the local market.'However, as with any commodities-based industry, predicting demand is not easy. Other regional steel producers are also ramping up their capacity, while imports, especially after Riyadhs recent entry into the World Trade Organisation (WTO), are becoming more competitive.A question mark also hangs over feedstock supplies. The majority of Gulf production is derived from scrap, but with the traditional source markets of the former Soviet Union drying up, rates are set to rise. Iron ore rates are increasing and could also become problematic.Hadeed is not too concerned; it has long-term supply contracts for iron ore that should assure price stability. Earlier this year it acquired a 15 per cent stake in Australias Sphere Investments, which is developing an iron ore project in Mauritania. The purchase, the first by a regional producer into an emerging regional ore producer, will give Hadeed access to more than 650 million tonnes of iron ore over the
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