Emirates Steel Kizad expansion awaits gas feedstock allocation

Emirates Steel is set to become Kizad's next anchor tenant.

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Emirates Steel's third expansion will be built in the new Kizad industrial zone, and become the second anchor tenant of the fledgling hub.

The project will move ahead as soon as the Abu Dhabi Government hands the steel maker the gas allocation for the energy-intensive facility, which will increase the company's output by almost a third.

"We are ready to award the project, but we want the gas to be allocated by the Government. Once this happens, we will go ahead," said Saeed Al Romaithi, Emirates Steel's chief executive.

The new plant will be a significant boost to the Khalifa Industrial Zone, known as Kizad. The huge zone and its accompanying harbour were inaugurated last year, and are key to Abu Dhabi's efforts to diversify its economy away from hydrocarbons.

Kizad's only big tenant so far is Emirates Aluminium (Emal), whose smelter was active even before the zone was completed. It is hoped that large-scale producers such as Emal and Emirates Steel attract downstream industries that turn basic metals into more complex products.

The state-owned company issued a tender for the steel mill in September 2011. According to the Middle East Economic Digest (Meed), the Italian contractor Danieli submitted the lowest bid for the construction of the facility the following June, and is the preferred bidder for the plant's construction.

The construction period will last about 30 months, Suhail Al Ameri, the company chairman, said when the tender was announced.

After two expansion phases costing a combined Dh9 billion were completed last year, Emirates Steel has a production capacity of 5.5 million tones of steel, making it one of the region's largest producers.

Abu Dhabi is grappling with a shortage of natural gas, the prime feedstock for power plants in the Arabian Gulf, as runaway consumption of electricity is exhausting domestic gas supplies. The Government is developing unconventional gasfields, and is turning towards liquefied natural gas (LNG) imports to avoid a shortfall. The Shah sour gas project will come online next year, and LNG will be imported from a floating terminal in Fujairah from 2015.

With industrialisation high on the list of government priorities, Mr Al Rumaithi is confident the Phase 3 expansion will be allocated its gas supply.

Emirates Steel will grow sales between 3.5 and 4.5 per cent this year on the back of an active regional construction sector, according to the chief executive.

"There is healthy demand, short, medium and even long-term," said Mr Al Rumaithi.

The company's biggest markets lie in the UAE and Saudi Arabia. Qatar's anticipated Fifa World Cup construction boom is yet to come into full swing, he added.

"We expect the peak to be around 2015-16. It's a potential market," said Mr Al Rumaithi, whose company will exhibit at the Projects Qatar trade exhibition in Doha next month.

Emirates Steel signed an iron ore supply deal with Sweden's LKAB last month, and further agreements could be tied up soon.