An Abu Dhabi conglomerate plans to develop a Dh1.1 billion steel plant that will create 370 jobs.
Senaat, the state-owned Abu Dhabi-based holding corporation, said it has entered a joint venture with two Japanese steel makers to build steel pipes for industrial use.
The plan for the new company, Al Gharbia Pipe, comes as the emirate accelerates its push to diversify from crude oil.
JFE Steel and Marubeni-Itochu Steel are joining Senaat in the project to manufacture steel pipes for customers in the energy and construction industries at a plant in the Khalifa Industrial Zone of Abu Dhabi (Kizad).
The company will reduce the country’s reliance on steel pipe imports while exporting 40 per cent of its production, Senaat executives said in Abu Dhabi yesterday.
“In striving to uphold our mandate of championing UAE industry and contributing to the nation’s diversification efforts, Senaat will continue to expand its portfolio through global partnerships with leaders in their respective fields,” said Suhail Al Ameri, the chief executive of Senaat.
“The project not only meets stringent demand at a time where being efficient in the oil and gas and other industries is more important than ever, but it is also symbolic of the strength and the calibre of the relationships that we are able to forge.”
Al Gharbia Pipe is expected to be up and running by 2018 with a production capacity of 240,000 tonnes a year. The Japanese companies will provide the steel plates for manufacturing the pipes, but Senaat said it would be open to taking steel from local producers if they could meet its specifications.
Financing of the company is expected be done this year and the Japanese firms will have a 49 per cent stake in the venture, according to Jamal Al Dhaheri, Senaat’s chief operating officer.
Senaat is aiming to build a steel hub in the emirate to grow the country’s industry. The company’s portfolio of businesses already includes Emirates Steel and Taweelah Aluminum Extrusion Company. Expanding the industrial base has become increasingly urgent after the price of oil, upon which Abu Dhabi relies to drive economic growth, shed about half of its value since June amid an increase in North American energy production.
Senaat said this week that it plans to invest Dh5bn over the next two years to develop refining industries and is considering an initial public offering of one of its units this year, the chairman said.
The company has invested more than Dh16bn developing the metals sector over the past five years, said Hussain Al Nowais.
Still, Takafumi Nishiuma, vice president of JFE Steel, said that despite the recent drop in oil, there was still plenty of demand projected for steel pipes from energy companies in the Arabian Gulf.
“The GCC region is highly competitive in terms of drilling costs and oil and gas reserves capacity,” he said. “With the development and production of oil and gas forecast to remain robust across the region despite recent volatility, the demand for high-quality steel pipelines to transport these resources is expected to expand steadily. We see high opportunities for investment in this market, and particularly in the UAE.”
Senaat, which translates as “industries”, manages more than $6.9bn of industrial assets and employs more than 15,000 people.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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