Steel bids opened, but Nisco under pressure

12 April 2002

The local Hormozgan Steel Complexis evaluating technical bids for a new integrated steel venture in the mines and metals special economic zone in Bandar Abbas following the submission of proposals in mid March. The tender comes amid uncertainty about the future of new steel projects due to intense competition in international markets and rumours about financial difficulties at the National Iranian Steel Company (Nisco- MEED 22:2:02).

Hormozgan received three bids for the first package on the project covering the construction of a 1.65 million-tonne-a-year (t/y) direct reduction iron plant. Four bids were submitted for the second package, which calls for the construction of a 1.5 million-t/y slab and lime-calcining plant.

Bidding consortia are made up of teams including at least one local and one international company. It is understood that one consortium bid for both packages on the scheme. Foreign firms participating in the tender include Austria's Voest Alpine Industrieanlagenbau (VAI), Germany's SMS Demag, Italy's Danieli & Companyand Japan's Kobe Steel. Companies were requested to submit their own financing proposals.

Hormozgan expects to complete the evaluation of the proposals by mid June.

Industry sources say the execution of the Hormozgan plant will depend on the construction of a new 4 million-t/y pelletising plant in Sirjan in Kerman province, which is to provide feedstock for Hormozgan. The Sirjan plant, which will be operated by Nisco subsidiary Gol-e Gohar Iron Ore Company, the operator of the country's biggest iron ore mine, is being retendered following the announcement by the Industries & Mines Ministry in January that stricter guidelines will be imposed on international tenders (MEED 22:2:02).

However, some industry sources say the delays on the project may also be related to financial difficulties at state-owned Nisco due to tough international competition and falling steel prices due to cheap imports flooding in from Central Asia.

'The international market is not good, and cheap imports from the CIS [Commonwealth of Independent States] have put Nisco under increased pressure,' says one industry source. 'The company sits on mountains of stock and keeps producing but does not sell.'

In view of the looming steel war between the EU and the US, and prospects of further low cost steel being imported from Central Asia, the Industries & Mines Ministry on 6 April called on the government to impose restrictions on steel imports to protect the local industry.

Despite the developments, Nisco plans to press ahead with the Sirjan project. In March, the company extended the initial 11 March deadline to 4 May. Companies participating in the tender for the estimated $150 million-200 million turnkey scheme are expected to include Kobe Steel, VAI and Danieli & Company. All three companies participated in the first tender, issued by Nisco in November 2000 (MEED 24:11:00).

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