Qatar Steel is planning to relaunch its expansion project, which was pulled from the financing market in 2007 as the global financial crisis began to hit bank appetite for project lending.

The company is currently seeking to appoint a financial adviser for the project, and has approached several international banks about the role, but has yet to make a formal appointment.

Middle East steel demand*
Iran 39
Saudi Arabia 22
UAE 15
Other GCC 8
Syria 6
Iraq 4
Others 6
*=Total 43.92 million tonnes
Source: Metal Bulletin 

The deal is a resurrection of a $1.34bn project finance deal that was being led by the UK’s Ernst & Young in 2007. Eventually the deal was pulled from the market, with Qatar Steel citing “credit market conditions” at the time.

“This project is even more essential for Qatar now than ever. Qatar will need all the steel it can get for the development of the infrastructure it needs for the World Cup [in 2022],” says a banker close to the process.

When the deal last came to the market, banks approached said the structure of the financing was too aggressive at the time. Both pricing and protections available deemed inadequate at a time when most banks were losing billions of dollars on structured investments and securitised products.

The new deal is likely to come at a very different time for both the banking market and Qatar. The project finance market has stabilised and begun to improve since the financial crisis. Qatar’s strong economic growth and massive investment plans as part of its World Cup preparation have made it one of the most attractive places to lend in the region.

In March, Qatar Steel awarded Austria’s Siemens Steel a contract for a 1.1 million tonne-a-year steel making plant. The plant will include an arc furnace, ladle furnace and a high-speed billet caster. The engineering and fabrication will be carried out in Austria.

“We will be providing the steel shop and we have already started preliminary engineering work,” says a spokesman for Siemens Steel. “We expect commissioning to start by early 2013.” The spokesman declined to disclose the value of the deal.

The engineering, procurement and construction contract for civil works, steel erecting and utilities is being tendered by Qatar Steel, but no awards have yet been made.